Macroeconomics, the economy, inflation etc. *likely to be very dull*
Comments
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And we did pay down debt after the financial crisis. It's lucky we did too or we'd be even more wangered.0
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Yeah, so my argument there is that the austerity when global growth was still sluggish, especially during the sovereign debt crisis, was a policy mistake that hurt growth (which is obviously not good for the debt/gdp ratio). > that's what the article above is saying.0
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It's an article which wistfully plays with hindsight and virtually reality.0
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Well no, the article highlights the conclusion from the IMF report which is based in evidence.focuszing723 said:It's an article which wistfully plays with hindsight and virtually reality.
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Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
This is about as important as it gets in a discussion about fiscal policy, but do you understand the difference between debt and deficit? You refer to the deficit above but you should be referring to the debt. I assume you do and that "deficit" above is a typo and you've misremembered the data.rick_chasey said:
And the argument was made in 2010, the UK deficit continued to rise for quite a while...wallace_and_gromit said:
There was also no reference to the impact on debt costs if the sovereign debt markets decide those in charge of a particular country are spendthrifts or otherwise clueless. This might not affect the US, but it certainly affects the UK, as the Truss-induced "Muppet Premium" last Autumn demonstrated. So there will always be a balance that needs to be struck between "borrowing for growth" and fiscal prudence.surrey_commuter said:
Frankly I only skim read it but most appeared to be about restructuring which I took to not be relevant to the UKrick_chasey said:
Go on quote the next bitssurrey_commuter said:
Funnily enough I read the policy prescriptions as agreeing with merick_chasey said:
Economic growth and inflation play an important role in reducing debt ratios. Growth reduces debt ratios not only through its effects on nominal GDP, but also because countries on average consolidate (run higher primary balances) during good times.
• In terms of policy lessons, countries aiming for a moderate and gradual reduction in debt ratios should implement well-designed fiscal consolidations, particularly when economies are growing faster and when external conditions are favorable. The debt reduction effects of fiscal adjustments are often reinforced when accompanied by growth-enhancing structural reforms and strong institutional frameworks.
I guess this balance is like assessing how fast to take a corner going downhill on a bike. Better to get to the bottom thinking you could have gone faster than to end up in a ditch half way down.
The deficit (the difference between cash out and cash in per year) peaked (in absolute terms as well as % GDP terms) in the financial year 2009/10 and fell thereafter.
https://www.economicshelp.org/blog/5922/economics/uk-budget-deficit-2/
The debt (the total outstanding government debt) continued to rise after 2010, which in absolute terms, it will unless there is a surplus rather than a deficit, which happens very rarely. (Last time in the UK was early 2000s IIRC.) In terms of the more important % of GDP measure, the debt fell in financial years 2017/18 and 2018/19, before the Covid impact struck.
https://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/
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Come on though, hindsight again. No experts were calling those events, to say so is fanciful. Also the 0.001% that did (the Micheal Burry's) it's either genius or some bugger is going to guess right.rjsterry said:
Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.
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wonderful hindsight there.rjsterry said:
Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.
There are always a tiny number of doomsayers and occassionally they are right. More often than not they are wrong.
Had the GFC been expected it would have been mitigated.
Covid - yes there has and remains the ongoing possibility og global pandemics, but did anyone predict it would happen when it did?
What I think Rick fails to recognise about austerity was that due to the policies of the Government prior to the GFC, there was not the ability to do anything other than austerity in the immediate aftermath.
It is however absolutely reasonable to make a case that austerity lasted too long, in the same way as the US and UK keeping interest rates artificially low and spending too much in the 2000s helped fuel the GFC.
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So the US did a monster stimulus package and the UK could have done the same if it wanted to. I don't buy the argument the UK was backed into a corner on austerity. There was a lot of discussion at the time on whether austerity was indeed the correct solution.Dorset_Boy said:
What I think Rick fails to recognise about austerity was that due to the policies of the Government prior to the GFC, there was not the ability to do anything other than austerity in the immediate aftermath.
It is however absolutely reasonable to make a case that austerity lasted too long, in the same way as the US and UK keeping interest rates artificially low and spending too much in the 2000s helped fuel the GFC.
And I don't understand the "artificially low" line re interest rates.
What is artificial and what is natural when it comes to central bank rates?
Again, this is a really frustrating argument as the empircal evidence was that austerity was the wrong choice and it hurt growth *more than the extra cost in borrowing would have cost* so I don't really understand why people are so keen to defend it.0 -
China has a massive 228 nuclear reactors in development, according to GlobalData. If completed, these will have a capacity larger than Germany's entire power grid.I do find this staggering. Also, this is worth a watch and shows how China are really pushing towards EV's. Part of the reason Telsa dropped their prices is because the Chinese market it so competitive.
https://www.youtube.com/watch?v=ONFSVOI1Ge4
I think now building Nuclear reactors/SMR's is a good move by the government. As we know they've already announced that. Although I'm still a bit hesitant about nuclear power.0 -
Yea sorry was thinking of the debt to gdp ratio.wallace_and_gromit said:
This is about as important as it gets in a discussion about fiscal policy, but do you understand the difference between debt and deficit? You refer to the deficit above but you should be referring to the debt. I assume you do and that "deficit" above is a typo and you've misremembered the data.rick_chasey said:
And the argument was made in 2010, the UK deficit continued to rise for quite a while...wallace_and_gromit said:
There was also no reference to the impact on debt costs if the sovereign debt markets decide those in charge of a particular country are spendthrifts or otherwise clueless. This might not affect the US, but it certainly affects the UK, as the Truss-induced "Muppet Premium" last Autumn demonstrated. So there will always be a balance that needs to be struck between "borrowing for growth" and fiscal prudence.surrey_commuter said:
Frankly I only skim read it but most appeared to be about restructuring which I took to not be relevant to the UKrick_chasey said:
Go on quote the next bitssurrey_commuter said:
Funnily enough I read the policy prescriptions as agreeing with merick_chasey said:
Economic growth and inflation play an important role in reducing debt ratios. Growth reduces debt ratios not only through its effects on nominal GDP, but also because countries on average consolidate (run higher primary balances) during good times.
• In terms of policy lessons, countries aiming for a moderate and gradual reduction in debt ratios should implement well-designed fiscal consolidations, particularly when economies are growing faster and when external conditions are favorable. The debt reduction effects of fiscal adjustments are often reinforced when accompanied by growth-enhancing structural reforms and strong institutional frameworks.
I guess this balance is like assessing how fast to take a corner going downhill on a bike. Better to get to the bottom thinking you could have gone faster than to end up in a ditch half way down.
The deficit (the difference between cash out and cash in per year) peaked (in absolute terms as well as % GDP terms) in the financial year 2009/10 and fell thereafter.
https://www.economicshelp.org/blog/5922/economics/uk-budget-deficit-2/
The debt (the total outstanding government debt) continued to rise after 2010, which in absolute terms, it will unless there is a surplus rather than a deficit, which happens very rarely. (Last time in the UK was early 2000s IIRC.) In terms of the more important % of GDP measure, the debt fell in financial years 2017/18 and 2018/19, before the Covid impact struck.
https://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/0 -
Lots of direct/indirect jobs and catering for a much needed resource which as we know we are going to struggle with now.0
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I will just take the liberty of stating that again. 228 nuclear reactors in development.0
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There is good Government spending too. HS2 is just p1ss1ng money into the wind in my mind.0
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You can’t just u-turn and not expect me to notice, especially when stealing my clothes.rick_chasey said:
It says it in the article. When growth is good, it's a good time to fix the gdp/debt ratio. i.e. countercyclical fiscal policy.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
We're not reinventing the wheel here.
The temptation is always to be cyclical, but that just makes it worse.
I see it like this: a decade of falsely focussing on the debt and not growth has now created the conditions that debt is a problem. So the debt people can say "i told you so" but it is a mess of their own creation.
I am pay down when possible so you can borrow when necessary.
You are in favour of borrowing slightly less than growth in good times and spending like a drunken sailor in bad times.0 -
I would be happy to compromise if we agreed on a range on debt-to-GDP ratio a government needs to comply with, if that ratio is arrived at through empirical evidence that over x ratio countries will probably have problems. I'd ideally prefer to focus on % of spending on gov't debt, but that's obviously too far for you as you don't belive that will ever be reign in.surrey_commuter said:
You can’t just u-turn and not expect me to notice, especially when stealing my clothes.rick_chasey said:
It says it in the article. When growth is good, it's a good time to fix the gdp/debt ratio. i.e. countercyclical fiscal policy.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
We're not reinventing the wheel here.
The temptation is always to be cyclical, but that just makes it worse.
I see it like this: a decade of falsely focussing on the debt and not growth has now created the conditions that debt is a problem. So the debt people can say "i told you so" but it is a mess of their own creation.
I am pay down when possible so you can borrow when necessary.
You are in favour of borrowing slightly less than growth in good times and spending like a drunken sailor in bad times.
I still maintain our difference of opinion is you just feel any debt is bad, whereas I think it's necessary and that the it is an ingredient to growth, and like all ingredients, too little or too much is bad.0 -
Do you have any of this empirical evidence re adverse growth impacts being worse than potential higher borrowing costs? Nothing you've presented so far actually makes the case that fiscal policy under the Coalition / Tories harmed economic growth relative to what might have been expected in the aftermath of a major banking crisis, where banks were hording liquidity and very reluctant to lend to SMEs. Your links have just been to general articles about tight fiscal policy not delivering the growth rates promised, which is more just another variant on the "Politicians tell you what you want to hear to get you to vote for them" theme than analysis of the merits / demerits of tight vs loose fiscal policy.rick_chasey said:Again, this is a really frustrating argument as the empircal evidence was that austerity was the wrong choice and it hurt growth *more than the extra cost in borrowing would have cost* so I don't really understand why people are so keen to defend it.
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I remember before Rick, you said it doesn't matter what a Government spends it's/our money on as long as it creates growth. See, it has to be beneficial to my mind.0
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Thanks. Given the inherited deficit was 10% of GDP, the debt to GDP ratio was guaranteed to rise for a few years, unless it's considered reasonable to eliminate such a large deficit in no more than a couple of financial years.rick_chasey said:
Yea sorry was thinking of the debt to gdp ratio.wallace_and_gromit said:
This is about as important as it gets in a discussion about fiscal policy, but do you understand the difference between debt and deficit? You refer to the deficit above but you should be referring to the debt. I assume you do and that "deficit" above is a typo and you've misremembered the data.rick_chasey said:
And the argument was made in 2010, the UK deficit continued to rise for quite a while...wallace_and_gromit said:
There was also no reference to the impact on debt costs if the sovereign debt markets decide those in charge of a particular country are spendthrifts or otherwise clueless. This might not affect the US, but it certainly affects the UK, as the Truss-induced "Muppet Premium" last Autumn demonstrated. So there will always be a balance that needs to be struck between "borrowing for growth" and fiscal prudence.surrey_commuter said:
Frankly I only skim read it but most appeared to be about restructuring which I took to not be relevant to the UKrick_chasey said:
Go on quote the next bitssurrey_commuter said:
Funnily enough I read the policy prescriptions as agreeing with merick_chasey said:
Economic growth and inflation play an important role in reducing debt ratios. Growth reduces debt ratios not only through its effects on nominal GDP, but also because countries on average consolidate (run higher primary balances) during good times.
• In terms of policy lessons, countries aiming for a moderate and gradual reduction in debt ratios should implement well-designed fiscal consolidations, particularly when economies are growing faster and when external conditions are favorable. The debt reduction effects of fiscal adjustments are often reinforced when accompanied by growth-enhancing structural reforms and strong institutional frameworks.
I guess this balance is like assessing how fast to take a corner going downhill on a bike. Better to get to the bottom thinking you could have gone faster than to end up in a ditch half way down.
The deficit (the difference between cash out and cash in per year) peaked (in absolute terms as well as % GDP terms) in the financial year 2009/10 and fell thereafter.
https://www.economicshelp.org/blog/5922/economics/uk-budget-deficit-2/
The debt (the total outstanding government debt) continued to rise after 2010, which in absolute terms, it will unless there is a surplus rather than a deficit, which happens very rarely. (Last time in the UK was early 2000s IIRC.) In terms of the more important % of GDP measure, the debt fell in financial years 2017/18 and 2018/19, before the Covid impact struck.
https://www.economicshelp.org/blog/334/uk-economy/uk-national-debt/0 -
Pandemics are a pretty regular and predictable phenomenon - remember SARS and MERS? - which is why there was a government exercise a to test readiness for such an event. It's just people putting their fingers in their ears.focuszing723 said:
Come on though, hindsight again. No experts were calling those events, to say so is fanciful. Also the 0.001% that did (the Micheal Burry's) it's either genius or some censored is going to guess right.rjsterry said:
Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
I mean, I can only post so many links describing exactly what I've said.wallace_and_gromit said:
Do you have any of this empirical evidence re adverse growth impacts being worse than potential higher borrowing costs? Nothing you've presented so far actually makes the case that fiscal policy under the Coalition / Tories harmed economic growth relative to what might have been expected in the aftermath of a major banking crisis, where banks were hording liquidity and very reluctant to lend to SMEs. Your links have just been to general articles about tight fiscal policy not delivering the growth rates promised, which is more just another variant on the "Politicians tell you what you want to hear to get you to vote for them" theme than analysis of the merits / demerits of tight vs loose fiscal policy.rick_chasey said:Again, this is a really frustrating argument as the empircal evidence was that austerity was the wrong choice and it hurt growth *more than the extra cost in borrowing would have cost* so I don't really understand why people are so keen to defend it.
Most of the analysis looks at austerity across the world, as it's a broader data set and evens out local issues. But I'll find some that spell it out for you
Here's one from 2015:
https://blogs.lse.ac.uk/politicsandpolicy/austerity-past-present-and-future/Did austerity play a role in the UK’s poor economic performance? Or is the Chancellor right to say that things would have been even worse if the pace of fiscal consolidation had been slower?
To be sure, many factors outside the government’s control helped create the worst recovery this century, as illustrated in Figure 1. The European Union is our biggest trading partner, and the eurozone crisis has had a drag on the UK. Of course, part of the reason for this is that the eurozone has also been pursuing similar austerity policies. Furthermore, high commodity prices and the decline of high productivity sectors like oil and finance were a drag.
Taking account of such factors, the OBR estimated that 2% of GDP was lost due to austerity policies (1% in 2010-11 and in 2011-12). This is likely to be a conservative estimate because recent research suggests much larger multipliers in severe downturns.
The main justification for accelerating austerity and taking this growth hit was that the UK faced the risk of a Greek-style debt crisis. This argument is wholly implausible – unlike the eurozone, the UK has its own currency so liquidity crises do not become insolvency crises. We also had larger public debt levels – over 80% for half the twentieth century (1917 to 1968) – and have avoided formal defaults.
It's even standard when discussing the public health implications:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4952125/Many governments in Europe, either of their own volition or at the behest of the international financial institutions, have adopted stringent austerity policies in response to the financial crisis. By contrast, the USA launched a financial stimulus. The results of these experiments are now clear: the American economy is growing and those European countries adopting austerity, including the UK, Ireland, Greece, Portugal and Spain, are stagnating and struggling to repay rising debts. An initial recovery in the UK was halted once austerity measures hit. However, austerity has been not only an economic failure, but also a health failure, with increasing numbers of suicides and, where cuts in health budgets are being imposed, increasing numbers of people being unable to access care.
This lot think it cost https://progressiveeconomyforum.com/publications/the-macroeconomics-of-austerity/"needlessly cutting more than half a trillion pounds from public expenditure." and it goes on "Using figures from the Office for Budget Responsibility, the paper demonstrates that governments from 2010 onwards could have maintained historic rates of growth in public spending and still have reduced Britain’s government debt burden by 2019.The cost of failing to maintain this rate of public spending growth, and instead imposing spending cuts, came to £91bn of lost public expenditure in the final year of the austerity programme, or £540bn over 2010-19."
Here's the IMF in 2012: https://www.washingtonpost.com/news/wonk/wp/2012/10/12/imf-austerity-is-much-worse-for-the-economy-than-we-thought/Austerity is much worse for the economy than we thought
From the wiki article on UK austerity: https://en.wikipedia.org/wiki/United_Kingdom_government_austerity_programme#cite_note-guardian-9The rationale behind the need for achieving a balanced budget in the financial climate following the Great Recession has been questioned by some Keynesian economists. Andrew Gamble writing in Parliamentary Affairs in 2015 commented:[155]
Most macroeconomists now agree that the austerity programme pursued by the Coalition Government in its first two years was both too severe and unnecessary and set back the economic recovery which was underway in the first half of 2010. The Office of Budget Responsibility confirmed that the austerity programme reduced GDP, while the Oxford economist Simon Wren-Lewis has calculated that the Coalition Government's austerity programme cost the average household £4000 over the lifetime of the Parliament and severely damaged those public services which were not ring-fenced.0 -
Imagine thinking people read links or quote texts.0
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Some of us were discussing Russia in Ukraine during November 2021 (IIRC).focuszing723 said:
Come on though, hindsight again. No experts were calling those events, to say so is fanciful. Also the 0.001% that did (the Micheal Burry's) it's either genius or some censored is going to guess right.rjsterry said:
Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
I do, but they never seem to back up the claims made. e.g. there was one just before Easter that stated that austerity had damaged economic growth over 2010-2016. There was no evidence or analysis in that article, but there was a link - to an article that investigated the impact of the EU referendum result from 2016 onwards. I'll see if I can find said link.rick_chasey said:I think WAG reads some of them tbf.
And re the IMF article from 2012 that Rick linked, there's no reference to the potential impact of the banking crisis that affected the UK. IMF or not, any credible analysis of economic performance in the immediate aftermath of the GFC surely has to take into account the relative severity of that on an economy.
And the linked Krugman article from 2016 focuses on the argument made by countries with large deficits that they might become "another Greece". He dismisses this, and hence austerity, because sovereign issuers can never go bankrupt - they can just print more money. True enough, but there's no mention of the potential inflationary impacts of printing money, which seems like a bit of an oversight now when inflation rates are so high (albeit not just due to money printing, but it's a non-trivial factor).0 -
I was, but, and it's a big one. Was it just posturing, the timings, it was all hearsay you wouldn't have put any money on.pblakeney said:
Some of us were discussing Russia in Ukraine during November 2021 (IIRC).focuszing723 said:
Come on though, hindsight again. No experts were calling those events, to say so is fanciful. Also the 0.001% that did (the Micheal Burry's) it's either genius or some censored is going to guess right.rjsterry said:
Yes; no; yes.focuszing723 said:
How the hell do you time it though, was the financial crisis predicted, Brexit, covid?rick_chasey said:And SC, here's the important bit.
adequately timed and appropriately designed fiscal consolidations have a high probability of durably reducing debt ratios.
Gotta time it. I.e. countercyclically.
And Russia invaded Ukraine 9 years ago. 3 out of 4 were people ignoring what they could see with their own eyes.
I mean, it would have been bloody handy if we could have predicted Covid. It would have saved 500,000,000,000 quid.
That's a lot of growth!0 -
Nah, I'm out this is all wistful hindsight, you have to play your deck at the time.0
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It's literally in the ONS numbers. You just need to pull them out and line them up, which I CBA to do, mainly as I am not a trained economist.wallace_and_gromit said:
I do, but they never seem to back up the claims made. e.g. there was one just before Easter that stated that austerity had damaged economic growth over 2010-2016. There was no evidence or analysis in that article, but there was a link - to an article that investigated the impact of the EU referendum result from 2016 onwards. I'll see if I can find said link.rick_chasey said:I think WAG reads some of them tbf.
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That's what the article claimed. But the link was not to the evidence referenced. It was to a different time period and investigating a different effect. (And IIRC, wasn't even to the ONS.) I did have a brief shufty at the ONS website but didn't find anything obvious there. (The ONS tends to report actuals and the mechanical drivers of these rather than providing counter-factual analysis.)rick_chasey said:
It's literally in the ONS numbers. You just need to pull them out and line them up, which I CBA to do, mainly as I am not a trained economist.wallace_and_gromit said:
I do, but they never seem to back up the claims made. e.g. there was one just before Easter that stated that austerity had damaged economic growth over 2010-2016. There was no evidence or analysis in that article, but there was a link - to an article that investigated the impact of the EU referendum result from 2016 onwards. I'll see if I can find said link.rick_chasey said:I think WAG reads some of them tbf.
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Right. And the other links and statements? I feel like the level of assertion you need is for you to be taken step-by-step by a trained economist through the numbers, which is a level I cannot attain.
What is it about the economists above that you find unconvincing?0
