SunnySideUp

Seems that Labour have called the Economy right .... once again.

Remember last week when 20 economists backed the Tories plans for wholesale cuts in spending? Cuts that would harm every single person in this country and plunge the UK into the dark depths from which Labour have pulled us?

Well, more than 60 senior economists have signed two open letters that back the chancellor's decision to delay government spending cuts until 2011.

The letters say that any measures to trim the budget deficit this year could pull the country back into recession.

They are a riposte to the 20 economists who backed the Conservatives' call for cuts this year in the Sunday Times.

Labour 1 - 0 Tories then?

Chip

Just remind me who it was who got us into this state in the first place.

scud8

iTrader: (1)

The whole thing is on a knife edge. If we continue running big deficits and this spooks foreign investors then they will stop buying UK government debt and interest rates will shoot up (to the 10-15% kind of numbers we saw briefly in the early 90s). This will kill any recovery in the private sector stone dead - and require much more significant cuts in the public sector.

It's therefore crucial that investors see that the UK government is serious about keeping the deficit under control and doesn't intend to devalue or inflate it away.

Jamz3k

and what happens when we get the 2011 and spending is cut?

kingofturds

iTrader: (1)

Are these the same economic experts thatover the past decade, failed to see this crisis creeping up on us like a stricken oil super tanker heading for the rocks. And I see this is being headed by several labour life peers such as Lord Layard

ahar

iTrader: (3)

Monetarists vs keynsians

basically economists can't agree on this and never really have done. Labour is trying the keynesian route while the Tories favour the monetarist approach ( no surprise given camerons background working for Nigel lawson in the treasury).

I'm more on the monetarists side as this recession was caused by loose monetary policy (the financial crisis isn't the cause of the recession, it was a symptom). GDP was artificially high due to high borrowing thanks to cheap money - the reduction in GDP was a correction back to it's true non-artificially inflated state. The private sector will drive growth in the economy - high public spending at the moment will only prolong the artificial inflation of GDP, and the high taxes needed to maintain it will slow growth. They're gambling that the economy will grow enough to take over from the stimulus of public sector money, but all that gamble will fervid is a large deficit!

dunx

iTrader: (3)

It just means I'm quite likely to be made redundant next April, rather than this one...

dunx

r32

So so misleading, if you check the latest information there seems to be two groups of eminent economists, one is saying wait for cuts and supports the Governments do nothing strategy (perhaps because like every one knows we have an election). The other group say dont continue to borrow (record Government borrowing in January) so putting up the amount owed each month. But cut spending now, stop the borrowing, dont let the debt continue to grow (we are fast approaching Greece's debt levels and could lose our AAA rating). The latter group support the Conservatives.

Who's right? Nobody knows yet.

r32

Quote "Seems that Labour have called the Economy right .... once again."

Being independant I think this statement is incorrect, as previously mentioned the Government borrowed an amount which is a record for any January. Normally January provides a surplus and a respite from monthly borrowing. But not this year.
Also Gordon is looking at calling an early election as he fears a double dip in the economy. He has discussed this with his associates. So no the economy isnt right.

ScooByer Trade

If the banks decide to hold the money away from the government & they plough money into hospitals, schools plus other places worthy of the money.That would be a much better use of the wonga.The government & associates are useless & greedy when distributing money.They just see there money leaving there pockets & that is annoying for them, oh well who cares.

Martin2005

Dave are you completely unaware of your own hypocrisy or are just being ironic??

warrenm2

it all depends if the money is spent wisely - hands up anyone who thinks it is.... Bueller,...... Bueller.....?

YouTube - Bueller Bueller Bueller

SunnySideUp

Was it the Bankers or the Sub-Prime Lending fiasco in the US and then the underwriting of those debts by world banks?

Only an idiot would lay the blame at the door of any government in the world - let alone the UK Government!

What matters is how we get out of it ..... the tories are on record as saying, "Do Nothing" - a lone voice in the world (and with the benefit of hindsight completely and utterly wrong!).

The world followed Gordon Browns lead - and, like it or not, he pulled the world back from the edge.

ahar

iTrader: (3)

I think that you'll find quite a lot of economists and assorted financial experts and financial journalists who do lay some of the blame with governments.

And I agree with them. Monetary policy was far too loose allowing unacceptable levels of personal debt to accumulate - the idiots who messed around with sub prime mortgages were one of the symptoms if this, butvthe huge reductions in GDP are not due to some kind of mythical financial tsunami, a nit like a natural disaster like GB would like you to believe. GDP was artifically inflated thanks to a housing bubble and high personal borrowing. When the capital markets ground to a halt this flow of cheap money stopped and the party came to an end.

Now obviously it's not quite as simple as that and there have Bern knock on effects of the subsequent recession (such as the lack if credit facilities driving some good businesses to the wall). However , if you take the example of woolworths, they had been on the edge for years and only propped up by ever rising levels of cheap debt to cover their mounting cash flow problems. The financial crisis stopped the (too) cheap debt and they submitted to their fate much later than they should have.

Does this let the idiots running northern rock et al off the hook? No- they took advantage of the situation and took stupid risks and we poor taxpayers had to step in to sort them out. There was meant to be a regulator checking on what they were doing (the fsa) but they failed. And who set up the regulatory system for the banks that so miserably failed? Ah yes, Gordon brown.

Now what I will give gb credit for is the bailing outbid the banks- unpopular, expensive as it was, without it we would have been in serious trouble. However, two things I don't see know are
1) any kind of gratitude from the financial sector who probably would have collapsed as a whole without the bailout ( whether or not a particular institution took money - barclays I'm looking at you)
2) any kind of sensible plan of how to stop this happening again. Essentially we have to set up structures to effectively regulate the banks and to allow any bank or institution to fail without breaking everything else

Are the tories any better? Well I didn't see any sensible plan coming from them re the bailout or subsequently to set something to stop this happening again. They are talking about cutting the deficit sooner than labour, but I can't tell if that is based on a sound reading of the situation or just a political move to set some clear blue water between them and labour.

hodgy0_2

when you have economies that rely on a large financial sector, cheap money is inevitable

capitalism dictates that

money is the only commodity they have and the simple laws of competition dictate it will get cheaper, and we get the roller coaster rides we have seen in the last 30 years

and guarantee in 10-15 years we will have 125% mortgages again

Leslie

Are you saying then that they should keep on throwing the borrowed and printed cash away on completely useless projects, the overpowering beaurocracy, opening up more Quangos, throwing it at those who won't bother to work, giving it to the vast numbers of immigrants etc. etc.

Don't you think it would be better if they used that money above to really benefit the country in a way which would do us all some real good.

Les

ahar

iTrader: (3)

not sure that is the case as the central bank can control some crudelevers for the price of money such as interest rates. I agree that if the conditions are right then market forces will take any opportunity to the extreme.

hodgy0_2

didn't the ERM fiasco teach us who wins between central banks and market forces

ahar

iTrader: (3)

It's not about market forces vs the government - the gov and BoE set the market conditions. However, I will agree that if you set the market conditions one way and then attempt to constrain the market within those conditions (like what happened in the uk and us) then you are always going to lose.

The erm was a classic example of this - the market conditions (the artificial floor for the pound ) were set one way and the gov tried to work against them to the enrichment of George soros!

Leslie

Pete,

Do you advocate contiuing to borrow amoney for as long as they can sell the bonds that is, and running us deeper and deeper into debt? Maybe they are hoping that the IMF will back them instead of saying what they did to Callaghan.

If you were short of cash and in severe debt, would you just keep borrowing it on the plastic card, or would you stop spending so much?

It all has to be paid back eventually, as well as the interest of course. They are wondering if the country can produce sufficien GDP to pay just the interest apart from paying off the debts!

Les

Les

r32

At last some Leslie common sense.
If you were deep in debt, do you think any financial expert would tell you to continue borrowing, particularly if your income continued to fall?

David Lock

Does anyone know how much it actually costs to get rid of a £30k per annum civil servant with 20 years service who cannot find another job?

kingofturds

iTrader: (1)

see how many of there experts advising to carry on borrowing are either labour,scottish or life peers . And in some cases all 3
labour know they are finished so they are implementing a scorched earth policy. How anyone is going to sort this mess out though is anyones guess as we are at the mercy of foreign owned companies now .

mrtheedge2u2

YouTube - Ian Hislop on Question Time 18th Sep 2008

Ian Hislop pretty much hits the nail on the head (and amazingly for once, Harriet remains quiet )

alcazar

iTrader: (2)

Editted for accuracy

alcazar

iTrader: (2)

And the reason the UK went into the deepest and longest recession of any European country was.............?

Nowt to do with Sh*t Brown, of course

Leslie

That was a very entertaining and hard hitting session by Hislop, not a lot the others could say to reply to that. I did enjoy his "gaffe" and his reply about it to Bumblebum!

Les

Devildog

In what way, Pete, did Brown lead the world back from the edge?

What has he actually done, that the Tories would not?

This isn't the first time I've asked you this question, although hopefully this time you won't run and hide from providing an answer

The global "financial crisis" has many causes. US sub prime lending is but one. Irresponsible lending across many economies is another. Human greed at all levels plays a massive part in the whole sorry state of affairs. From investment bankers to joe blogs in the street with his car/tv/carpet all on the never never, becasue he can't be arsed to save up first.

But to say that Governments are not in any way to blame is just wrong.

Ask yourself why some economies have weathered the storm better than others.

UK plc was pretty much bankrupt before the downturn. Had we been in a much better position before it all went wrong, we would have been in a much better position now.

Anyway, anyone with half an ounce of understanding knows that, so I'm looking forward to your answer with interest.