LEAVE the Conservative Party and save your country!
Comments
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The medicine was low rates and austerity..Jezyboy said:Loosely speaking, would it not be correct to say that the economy did not recover well from 2008. So you could conclude that whatever medicine was used post 2008 was not tremendously successful.
We are now in a far bigger hole than 2008, and think the same medicine is somehow an answer.
As you point out there is no rate reduction left so all you're left with is fiscal policy.0 -
What do you do with your own finances? Do you spend everything you have or save money as well for a raining day.rick_chasey said:
The medicine was low rates and austerity..Jezyboy said:Loosely speaking, would it not be correct to say that the economy did not recover well from 2008. So you could conclude that whatever medicine was used post 2008 was not tremendously successful.
We are now in a far bigger hole than 2008, and think the same medicine is somehow an answer.
As you point out there is no rate reduction left so all you're left with is fiscal policy.
You seem a sensible bloke. I'm damn sure you do the latter.
I bet you haven't spent it all on a 100ft tall monument to debt in your back garden.0 -
I don't know if you've seen the metaphorical weather out there. It's raining. Hard.0
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Don't worry it will be sunny next week.Jezyboy said:I don't know if you've seen the metaphorical weather out there. It's raining. Hard.
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I find this approach so exasperating.focuszing723 said:
What do you do with your own finances? Do you spend everything you have or save money as well for a raining day.rick_chasey said:
The medicine was low rates and austerity..Jezyboy said:Loosely speaking, would it not be correct to say that the economy did not recover well from 2008. So you could conclude that whatever medicine was used post 2008 was not tremendously successful.
We are now in a far bigger hole than 2008, and think the same medicine is somehow an answer.
As you point out there is no rate reduction left so all you're left with is fiscal policy.
You seem a sensible bloke. I'm damn sure you do the latter.
I bet you haven't spent it all on a 100ft tall monument to debt in your back garden.
Macro-economics does not work like personal finance.
FWIW, the approach you are all espousing is the approach that is widely recognised to have deepened and worsened the great depression.
it was people like Keynes who understood that personal finance is not macro-economics who managed to pull the world out of that slumber.
It is absolute madness, I mean proper stone cold you-want-the-world-to-end, to cut spending in a recession.
Properly cukcoo crazy.0 -
I think it's a good strategy akin to the Hoover damn. As long as it isn't p1$$ed up the wall on projects which amount to nothing.rick_chasey said:
I find this approach so exasperating.focuszing723 said:
What do you do with your own finances? Do you spend everything you have or save money as well for a raining day.rick_chasey said:
The medicine was low rates and austerity..Jezyboy said:Loosely speaking, would it not be correct to say that the economy did not recover well from 2008. So you could conclude that whatever medicine was used post 2008 was not tremendously successful.
We are now in a far bigger hole than 2008, and think the same medicine is somehow an answer.
As you point out there is no rate reduction left so all you're left with is fiscal policy.
You seem a sensible bloke. I'm damn sure you do the latter.
I bet you haven't spent it all on a 100ft tall monument to debt in your back garden.
Macro-economics does not work like personal finance.
FWIW, the approach you are all espousing is the approach that is widely recognised to have deepened and worsened the great depression.
it was people like Keynes who understood that personal finance is not macro-economics who managed to pull the world out of that slumber.
It is absolute madness, I mean proper stone cold you-want-the-world-to-end, to cut spending in a recession.
Properly cukcoo crazy.0 -
Maybe it comes down to me (and SC presumably) being able to remember double digit interest rates so an increase of 2% from the current level appears to be very likely.rick_chasey said:
I guess my point is the rates don't go up to 2% for no reason, so before you get to that point, you need to know why they have gone up to 2%.surrey_commuter said:
Why? The only net buyer is the BofErick_chasey said:I'm saying rates will go up if they don't spend it.
(to take out the nuance).
This is what I don’t get, if you believe in the magic money tree why not go all in? Why on Earth is Rishi talking about raising taxes to balance the books?
And you did not answer Pross’s question of what happens if interest rates go up 2%?
The speed at which servicing costs have fallen suggest they could go the other way just as fast.
Realistically either it's going to go up to 2% because the economy is running seriously hot and inflation is a big issue (which is good for debt servicing anyway) or because the recovery has absolutely stalled because the gov't is on some gigantic austerity drive in order to keep the debt 'under control'.0 -
If people stopped thinking a country worked the same as a household, politics would be better.1
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Past performance not an indicator of future performance etc.Pross said:
Maybe it comes down to me (and SC presumably) being able to remember double digit interest rates so an increase of 2% from the current level appears to be very likely.rick_chasey said:
I guess my point is the rates don't go up to 2% for no reason, so before you get to that point, you need to know why they have gone up to 2%.surrey_commuter said:
Why? The only net buyer is the BofErick_chasey said:I'm saying rates will go up if they don't spend it.
(to take out the nuance).
This is what I don’t get, if you believe in the magic money tree why not go all in? Why on Earth is Rishi talking about raising taxes to balance the books?
And you did not answer Pross’s question of what happens if interest rates go up 2%?
The speed at which servicing costs have fallen suggest they could go the other way just as fast.
Realistically either it's going to go up to 2% because the economy is running seriously hot and inflation is a big issue (which is good for debt servicing anyway) or because the recovery has absolutely stalled because the gov't is on some gigantic austerity drive in order to keep the debt 'under control'.0 -
Whilst Governments are happy to buy their own debt from themselves, then they can keep interest rates low.
The problem will arise when they need to start selling their debt to other institutions, who will want a return closer to inflation.
I believe that since the BoE was formed in 1694, the base rate has averaged around 4.5%, and like Pross and SC, I can remember it in double digits and paying mortgage rates of 17%.
Even without the ERM fiasco, the base rate was around 5%, and mortgage rates 8-9% pa.
The current level of base rate is not normal, and rates will increase at some point.
Although as Rick has alluded to, the UK is pretty good at managing its Gilt issuances, and arguabley is far better at that than much of the rest of the world, with longer duaration debt and so a bigger range of when debt needs to be rolled over, the inevitable rise in interest rates at some point in the future will make it far more expensive to service the debt. That then means either issuing more debt to pay the existing interest (a dangerous thing to do), or increasing tax revenues, or cutting the costs of the public sector (or a combination).0 -
Regulator speak!rick_chasey said:
Past performance not an indicator of future performance etc.Pross said:
Maybe it comes down to me (and SC presumably) being able to remember double digit interest rates so an increase of 2% from the current level appears to be very likely.rick_chasey said:
I guess my point is the rates don't go up to 2% for no reason, so before you get to that point, you need to know why they have gone up to 2%.surrey_commuter said:
Why? The only net buyer is the BofErick_chasey said:I'm saying rates will go up if they don't spend it.
(to take out the nuance).
This is what I don’t get, if you believe in the magic money tree why not go all in? Why on Earth is Rishi talking about raising taxes to balance the books?
And you did not answer Pross’s question of what happens if interest rates go up 2%?
The speed at which servicing costs have fallen suggest they could go the other way just as fast.
Realistically either it's going to go up to 2% because the economy is running seriously hot and inflation is a big issue (which is good for debt servicing anyway) or because the recovery has absolutely stalled because the gov't is on some gigantic austerity drive in order to keep the debt 'under control'.
Alternatively, look as what has happened before, try to understand why, and the impact of it, and learn from it.
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Honestly, I think you are better off looking at places like Japan, who the rest of the Western world seems to be mirroring, albeit a decade later, than looking at the world 30 years ago.Dorset_Boy said:
Regulator speak!rick_chasey said:
Past performance not an indicator of future performance etc.Pross said:
Maybe it comes down to me (and SC presumably) being able to remember double digit interest rates so an increase of 2% from the current level appears to be very likely.rick_chasey said:
I guess my point is the rates don't go up to 2% for no reason, so before you get to that point, you need to know why they have gone up to 2%.surrey_commuter said:
Why? The only net buyer is the BofErick_chasey said:I'm saying rates will go up if they don't spend it.
(to take out the nuance).
This is what I don’t get, if you believe in the magic money tree why not go all in? Why on Earth is Rishi talking about raising taxes to balance the books?
And you did not answer Pross’s question of what happens if interest rates go up 2%?
The speed at which servicing costs have fallen suggest they could go the other way just as fast.
Realistically either it's going to go up to 2% because the economy is running seriously hot and inflation is a big issue (which is good for debt servicing anyway) or because the recovery has absolutely stalled because the gov't is on some gigantic austerity drive in order to keep the debt 'under control'.
Alternatively, look as what has happened before, try to understand why, and the impact of it, and learn from it.
30 years is a really long time.
There are a whole bunch of reasons why we are where we are, demography, lack of collective bargaining, inequality, blah blah blah but we are in a very different economic world.
Rates were that high back then because, partly, inflation would have gone through the roof had they been lower.
Plainly that is not the case now.
Don't confuse demand side with supply side economics either. I am advocating demand side policies here - supply side is where ideology comes into play and I get accused of being some kind of leftie (when, funnily enough, the city headhunter really isn't).0 -
The Bank of Japan (BOJ) keeps trying to print Japan back to economic prosperity, and it is not letting 25 years of failed stimulus policies get in its way. Negative interest rates were announced by the BOJ in January 2016 as the latest iteration in monetary experimentation. Six months later, the Japanese economy showed no growth, and it's bond market was a mess. Conditions deteriorated so far that the Bank of Tokyo-Mitsubishi UFJ Ltd., Japan's largest private bank, announced in June 2016 that it wanted to leave the Japanese bond markets because BOJ interventions had made them unstable.
While these economic woes present major problems for prime minister Yoshihide Suga and BOJ Governor Haruhiko Kuroda, they can serve as a cautionary tale for the rest of the world. Wherever they have been tried, chronically low-interest rates and huge monetary expansions have failed to promote real economic growth. Quantitative easing (QE) did not achieve its stated objectives in the United States or the European Union (EU), and chronic low-interest rates have been unable to revive Japan's once-thriving economy.
Why Negative Interest Rates Do Not Work
The Bank of Japan is not alone. Central banks have tried negative rates on reserve deposits in Sweden, Switzerland, Denmark, and the EU. As of July 2016, none had measurably improved economic performance. It seems that monetary authorities may be out of ammunition.
https://www.investopedia.com/articles/markets/080716/why-negative-interest-rates-are-still-not-working-japan.asp0 -
Yeah we're agreeing.
Monetary policy isn't the answer. No more rate lowering to stimulate demand so you need fiscal policy.
What are you trying to argue? That because you can't lower interest rates further you should do austerity now?0 -
I've already stated the Hoover damn was a good project which employed people helping to keep the US economy ticking over. Perhaps you had zero interest in remembering that.rick_chasey said:Yeah we're agreeing.
Monetary policy isn't the answer. No more rate lowering to stimulate demand so you need fiscal policy.
What are you trying to argue? That because you can't lower interest rates further you should do austerity now?0 -
Rick - nobody is arguing that the Govt should not be spending now. What we are arguing is that it is madness to only look at debt servicing costs this year when we are saddled with them for ever more.
Many of us believe that they will go up by 2% and that debt servicing costs will surpass NHS spending. If you assume total tax take is limited to 40% then you have put all of your eggs into the magic money tree. If that fails then you will see Greek levels of austerity.
FWIW I think you are far too negative about where we are now and whilst I don’t agree with that tvvat Bailey that we will fully recover by the end of this year I think we will by 2023.
You and Boris need to accept that Brexit has cut the capacity for growth and stop seeing it as an extended cycle to be spent out of.0 -
Yeah, I think you are massively underestimating how bad the current situation is now - both economically but also politically and massively overstating the likelihood of something happening in the future without giving thought to what would need to happen to get to that scenario. Rates don't just go up and down for no reason.
The UK political system will not survive another 10 years of austerity. It just won't. That is worth having some high borrowing costs. You will end up with very ugly populism that will make Brexit look like small fry.
The market, who is better placed than we are to decide what the cost of borrowing in the future - they aren't just looking at this year, they are very happy to buy 5-10, 30 year gilts at very low rates.
Honestly - we all complain about the polarisation of politics but those who look at the causes all put austerity as the number 1 cause. If you want the western world to not fall apart at the seems and start fighting itself and each other, you really have to sort this sh!t out.
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Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.0 -
Are the markets really buying the government debt or is it the central banks that are buying their own government's debt?
Those in the market buying it probably won't be holding it until duration (unless the duration is short in which case demand is reasonably strong) because the know that if interest rates rose by 2% they will see some serious capital erosion.
When significantly better returns can be had from equities, especially as economies recover, demand for debt will fall, unless the interest paid rises to an attractive rate.That is achieved by a fall in the value of debt already in issuance, and an increase in the coupon (interest) rate on new debt.0 -
One of the highlights of austerity has got to be how running the NHS over capacity for years set us up perfectly for a pandemic.
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All institutions hold gilts. Corporates, banks, asset managers, pension funds, insurers, the lot.Dorset_Boy said:Are the markets really buying the government debt or is it the central banks that are buying their own government's debt?
Those in the market buying it probably won't be holding it until duration (unless the duration is short in which case demand is reasonably strong) because the know that if interest rates rose by 2% they will see some serious capital erosion.
When significantly better returns can be had from equities, especially as economies recover, demand for debt will fall, unless the interest paid rises to an attractive rate.That is achieved by a fall in the value of debt already in issuance, and an increase in the coupon (interest) rate on new debt.0 -
Check the numbers for monthly new issuance and QE, you would need to be wilfully blind to think they are not buying their own debt.rick_chasey said:
All institutions hold gilts. Corporates, banks, asset managers, pension funds, insurers, the lot.Dorset_Boy said:Are the markets really buying the government debt or is it the central banks that are buying their own government's debt?
Those in the market buying it probably won't be holding it until duration (unless the duration is short in which case demand is reasonably strong) because the know that if interest rates rose by 2% they will see some serious capital erosion.
When significantly better returns can be had from equities, especially as economies recover, demand for debt will fall, unless the interest paid rises to an attractive rate.That is achieved by a fall in the value of debt already in issuance, and an increase in the coupon (interest) rate on new debt.0 -
Brexit was an emotional decision that was then post rationalised.rick_chasey said:Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.0 -
I just see a bunch of irresponsible cvnts who ran out of other people’s money to spend and so started borrowing to keep their popularity up. Ignore Covid and post GFC the last Budget was planning a £60bn deficit.rick_chasey said:Yeah, I think you are massively underestimating how bad the current situation is now - both economically but also politically and massively overstating the likelihood of something happening in the future without giving thought to what would need to happen to get to that scenario. Rates don't just go up and down for no reason.
The UK political system will not survive another 10 years of austerity. It just won't. That is worth having some high borrowing costs. You will end up with very ugly populism that will make Brexit look like small fry.
The market, who is better placed than we are to decide what the cost of borrowing in the future - they aren't just looking at this year, they are very happy to buy 5-10, 30 year gilts at very low rates.
Honestly - we all complain about the polarisation of politics but those who look at the causes all put austerity as the number 1 cause. If you want the western world to not fall apart at the seems and start fighting itself and each other, you really have to sort this sh!t out.
Deep down you know we were only playing at austerity0 -
Sure, but those emotions didn't spontaneously emerge from nowhere. A large part of the country were sufficiently unhappy with their lot to go out and vote, when they usually don't bother.surrey_commuter said:
Brexit was an emotional decision that was then post rationalised.rick_chasey said:Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
Well sure, and look at the mess "only playing" got us into. A party offering the spending cuts you are advocating would never get close to power and one that opted for it mid term would fall in short order.surrey_commuter said:
I just see a bunch of irresponsible cvnts who ran out of other people’s money to spend and so started borrowing to keep their popularity up. Ignore Covid and post GFC the last Budget was planning a £60bn deficit.rick_chasey said:Yeah, I think you are massively underestimating how bad the current situation is now - both economically but also politically and massively overstating the likelihood of something happening in the future without giving thought to what would need to happen to get to that scenario. Rates don't just go up and down for no reason.
The UK political system will not survive another 10 years of austerity. It just won't. That is worth having some high borrowing costs. You will end up with very ugly populism that will make Brexit look like small fry.
The market, who is better placed than we are to decide what the cost of borrowing in the future - they aren't just looking at this year, they are very happy to buy 5-10, 30 year gilts at very low rates.
Honestly - we all complain about the polarisation of politics but those who look at the causes all put austerity as the number 1 cause. If you want the western world to not fall apart at the seems and start fighting itself and each other, you really have to sort this sh!t out.
Deep down you know we were only playing at austerity
I think we all share your concerns that the current bunch are not equipped for Hoover Dam style projects - Johnson is great at expensive things that don't work - but I don't see much of an alternative.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
They wanted less foreign in their lives then made up a bunch of reasons that sounded less racistrjsterry said:
Sure, but those emotions didn't spontaneously emerge from nowhere. A large part of the country were sufficiently unhappy with their lot to go out and vote, when they usually don't bother.surrey_commuter said:
Brexit was an emotional decision that was then post rationalised.rick_chasey said:Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.0 -
The spending cuts I allude to will be forced upon us.rjsterry said:
Well sure, and look at the mess "only playing" got us into. A party offering the spending cuts you are advocating would never get close to power and one that opted for it mid term would fall in short order.surrey_commuter said:
I just see a bunch of irresponsible cvnts who ran out of other people’s money to spend and so started borrowing to keep their popularity up. Ignore Covid and post GFC the last Budget was planning a £60bn deficit.rick_chasey said:Yeah, I think you are massively underestimating how bad the current situation is now - both economically but also politically and massively overstating the likelihood of something happening in the future without giving thought to what would need to happen to get to that scenario. Rates don't just go up and down for no reason.
The UK political system will not survive another 10 years of austerity. It just won't. That is worth having some high borrowing costs. You will end up with very ugly populism that will make Brexit look like small fry.
The market, who is better placed than we are to decide what the cost of borrowing in the future - they aren't just looking at this year, they are very happy to buy 5-10, 30 year gilts at very low rates.
Honestly - we all complain about the polarisation of politics but those who look at the causes all put austerity as the number 1 cause. If you want the western world to not fall apart at the seems and start fighting itself and each other, you really have to sort this sh!t out.
Deep down you know we were only playing at austerity
I think we all share your concerns that the current bunch are not equipped for Hoover Dam style projects - Johnson is great at expensive things that don't work - but I don't see much of an alternative.
Does nobody remember when El Gordo pushed his luck by promising to balance the books over the economic cycle.
It seemed only a few months ago that Rick argued borrowing was fine so long as it was a lower % than the rate of growth.
Now in just 15 years the same people are arguing that it is irresponsible to not borrow as much as possible.
My argument is that the music will stop and we will have Greek style austerity enforced upon us.0 -
I think you have it back to front. Things were not great for a lot of people. Membership of the EU was the made up reason for things not being great.surrey_commuter said:
They wanted less foreign in their lives then made up a bunch of reasons that sounded less racistrjsterry said:
Sure, but those emotions didn't spontaneously emerge from nowhere. A large part of the country were sufficiently unhappy with their lot to go out and vote, when they usually don't bother.surrey_commuter said:
Brexit was an emotional decision that was then post rationalised.rick_chasey said:Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
rjsterry said:
I think you have it back to front. Things were not great for a lot of people. Membership of the EU was the made up reason for things not being great.surrey_commuter said:
They wanted less foreign in their lives then made up a bunch of reasons that sounded less racistrjsterry said:
Sure, but those emotions didn't spontaneously emerge from nowhere. A large part of the country were sufficiently unhappy with their lot to go out and vote, when they usually don't bother.surrey_commuter said:
Brexit was an emotional decision that was then post rationalised.rick_chasey said:Austerity was a political failure and policy makers at the time failed to understand the dangers of it and what the new economic environment was.
The reaction to the previous recession was far far too reliant on monetary policy both in the UK and in Europe and the governments abdicated any responsibility for the recovery through fiscal policy, so rather than getting the "sunny days" to "fix the roof" you got a serious of cloudy days with the potential of rain.
No we are in a position where monetary policy cannot do anything as the reinflation never happened because of austerity.
If this all seems too theoretical, pick your "Brexit is a vote from people who feel left behind by rich southerners", you can very easily see the cost of austerity.
For some. It was an unholy alliance, including those who will make lots of fast bucks from the chaos, and people who just don't like furriners.
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