Refunds to consumers of bank fraud doing more to stimulate economy than govt. initiatives - says Commie Financial Times

(72 Posts)
ttosca Wed 08-Aug-12 14:52:04

As I've said over and over... the problem with the economy is on the demand side, not the supply side.

Further deregulating businesses will not stimulate the economy, it will make the situation worse, as consumers will be even more insecure about their financial future.

Put real spending money in to people's hands and invest in infrastructure projects instead.

---
Refunds of mis-sold payment protection insurance are doing more to boost Britain’s stuttering economy than government initiatives to stimulate growth, official and bank data show.

The UK’s five biggest banks have set aside almost £9bn to cover claims for selling their customers loan insurance that was either not needed or could not be used, in one of the most costly consumer scandals on record.

www.ft.com/cms/s/0/47b6a6a2-df0f-11e1-97ea-00144feab49a.html#axzz22lrxyjbn

flatpackhamster Wed 08-Aug-12 15:43:31

And as you've been told over and over, borrowing to spend is what got us in this mess. That's all you're advocating, borrow-and-spend. At some point the pretend money merry-go-round will stop, and what happens then?

ttosca Wed 08-Aug-12 16:11:12

Flatpack

And as you've been told over and over, borrowing to spend is what got us in this mess. That's all you're advocating, borrow-and-spend. At some point the pretend money merry-go-round will stop, and what happens then?

And as I've explained over and over, borrowing is not what got in to this mess. It was not public spending which caused the financial crisis. It was the casino gambling of bankers.

No matter how much you try to propagate this fantasy narrative, it will not change the facts that prior to the financial crisis, public spending was not unprecedented and historically low. The deficit increased from 3% to over 11% after the financial crisis and subsequent recession.

The recession caused a loss of tax receipts and increase in welfare spending due to larger unemployment.

You will also find that 'this mess' is a global crisis, hitting almost every developed Western country, whether they ran their budgets in surplus or with a larger deficit than the UK.

So you can stop spreading this nonsense that spending too much on schools and hospitals is what caused a global financial meltdown and the worst recession since the 1920s, because it's absurd and not credible in the least bit.

Furthermore, drastically cutting public spending is counter-Keynesian and has been shown not to work in the past. So long as the UK keeps sucking the economy dry, we will remain in a recession.

flatpackhamster Wed 08-Aug-12 16:48:49

ttosca

And as I've explained over and over, borrowing is not what got in to this mess. It was not public spending which caused the financial crisis. It was the casino gambling of bankers.

Who's talking about the financial crisis? I'm talking about the moribund economy.

No matter how much you try to propagate this fantasy narrative, it will not change the facts that prior to the financial crisis, public spending was not unprecedented and historically low. The deficit increased from 3% to over 11% after the financial crisis and subsequent recession.

No it wasn't. Firstly, it was low compared to 1944, when we were engaged in a global war. At no other point in history has our spending been as high.

Secondly, there was heaps of spending off-balance sheet, such as PFI, which is still money we owe but doesn't appear on the books.

Finally, there was also structural deficit, being paid for by borrowing.

The recession caused a loss of tax receipts and increase in welfare spending due to larger unemployment.

Which is manageable within the constraints of a normal, healthy economy not burdened by immense debts, which our economy isn't and hasn't been for decades.

You will also find that 'this mess' is a global crisis, hitting almost every developed Western country, whether they ran their budgets in surplus or with a larger deficit than the UK.

And those nations who haven't overspent are in a better position to recover. The lower your debts, the easier it is to get going again and the higher your growth rate.

Relentless overspending has caused the low growth rates.

So you can stop spreading this nonsense that spending too much on schools and hospitals is what caused a global financial meltdown and the worst recession since the 1920s, because it's absurd and not credible in the least bit.

Furthermore, drastically cutting public spending is counter-Keynesian and has been shown not to work in the past. So long as the UK keeps sucking the economy dry, we will remain in a recession.

Keynesianism doesn't work. It doesn't work because politicians like the bit about spending, but when they're told to stop spending they can't. It's a failed creed, like socialism, and it's long past the time both of them were consigned to the scrapheap where they belong.

CogitoErgOlympics Thu 09-Aug-12 07:20:13

"the problem with the economy is on the demand side"

That's correct, but demand in this context is not simply local consumption. Exports constitute a large part of our GDP and, with a 'global crisis hitting almost every developed Western country' and a drop in growth in a few Eastern countries besides, this revenue stream is badly affected.

Even if you leave public spending out of the equation completely, much of the last boom was credit-funded. The consumer base has spent the last 4 or 5 years therefore either paying down debts run up during the previous decade or building up their savings. A large proportion of any 'real money put into people's hands' is likely to go the same way.

Have no problem with more cash going into infrastructure projects. It is how the last government should have spent more of the cash rather than plumping up the public sector.

edam Thu 09-Aug-12 20:34:19

The government's poured billions into the banks, to very little effect. It's got to be worth trying to put some money straight into the hands of actual people and actual businesses. We might actually do something useful with it.

niceguy2 Sat 11-Aug-12 09:16:17

much of the last boom was credit-funded

Exactly. And most people understand that the simple concept that you cannot continue to borrow forever. And now we realise that not even western governments can continue to borrow forever.

People need to start accepting that as a nation we've spent far more money than we should have and now it's time to pay some of this money back. And that's always painful as inevitably debt repayments cuts into money we could be spending on other things.

@Edam. The problem is not putting money straight into the hands of actual people. That would be pretty easy. All the government would need to do is pop a cheque in the post to each citizen. Or perhaps a bonus via say Child Benefit recipients. The problem is the money being spent needs to be sustainable. Giving everyone a one off bonus will help for well....one time. Once that money is spent, the economy goes back to where it was.

ttosca Sun 12-Aug-12 18:28:40

flatpack-

And as I've explained over and over, borrowing is not what got in to this mess. It was not public spending which caused the financial crisis. It was the casino gambling of bankers.

Who's talking about the financial crisis? I'm talking about the moribund economy.

The 'moribund economy' is the result of the financial crisis.

No matter how much you try to propagate this fantasy narrative, it will not change the facts that prior to the financial crisis, public spending was not unprecedented and historically low. The deficit increased from 3% to over 11% after the financial crisis and subsequent recession.

No it wasn't. Firstly, it was low compared to 1944, when we were engaged in a global war. At no other point in history has our spending been as high.

These statements are factually incorrect:

First of all, public spending has been higher for decades in the past. The period between 1960-1985 shows higher public spending as a percentage of GDP than 2008, when it was at 40%.

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=F0-total&year=1900_2011&units=p&state=UK

Secondly, there is absolutely nothing wrong with public spending per se, or even an increasing share of spending as percentage of GDP, so long as money isn't wasted and we can afford the spend it.

Thirdly, the public net debt is at a historical low-point, despite the financial crisis and subsequent hundred billion pound bailouts. Prior to the crisis, it remained at a level which was very roughly the same since about 1990:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=G0-total&year=1900_2011&units=p&state=UK

Secondly, there was heaps of spending off-balance sheet, such as PFI, which is still money we owe but doesn't appear on the books.

Perhaps. Care to hazard how much this is - and back it up with figures and facts, seeing as you've already got so much so wrong?

Finally, there was also structural deficit, being paid for by borrowing.

The real risk from government debt is the burden of interest payments. Experts say that when interest payments reach about 12% of GDP then a government will likely default on its debt. Chart 5 shows that the UK is a long way from that risk. The peak period for government interest payments, including central government and local authorities, was in the 1920s and 1930s right after World War I.

Interest payments are at a historical low point now. There is no danger of the UK interest paryments getting out of hand:

www.ukpublicspending.co.uk/downchart_ukgs.php?chart=90-total&year=1900_2011&units=p&state=UK

The recession caused a loss of tax receipts and increase in welfare spending due to larger unemployment.

Which is manageable within the constraints of a normal, healthy economy not burdened by immense debts, which our economy isn't and hasn't been for decades.

Based on what information? All the wrong assertions you've made so far? We aren't burdened by immense debts.

You will also find that 'this mess' is a global crisis, hitting almost every developed Western country, whether they ran their budgets in surplus or with a larger deficit than the UK.

And those nations who haven't overspent are in a better position to recover. The lower your debts, the easier it is to get going again and the higher your growth rate.

Better position to recover how? By spending money, you mean? Like a Keynesian stimulus, you mean?

Relentless overspending has caused the low growth rates.

Utterly nonsense.

So you can stop spreading this nonsense that spending too much on schools and hospitals is what caused a global financial meltdown and the worst recession since the 1920s, because it's absurd and not credible in the least bit.

Keynesianism doesn't work. It doesn't work because politicians like the bit about spending, but when they're told to stop spending they can't. It's a failed creed, like socialism, and it's long past the time both of them were consigned to the scrapheap where they belong.

Keynesianism certainly does. The fact that you hate government spending and government per se doesn't change that fact. WWII is an excellent example of the fact that it works very well.

Counter-Keynesianism, where you cut spending during a recession, is counter-productive, as we seen in the UK, where we've experienced the longest double-dip recession on record.

flatpackhamster Mon 13-Aug-12 09:16:25

Hilarious. Our debts are low, our spending was low under labour, World War 2 shows how government spending boost the economy.

Comical Ali, I salute you in your new career.

ttosca Mon 13-Aug-12 10:51:45

flatpack-

Historically speaking, yes. Our debts are low. They shot up after 2008 because of the financial crisis and bank bailouts to their highest point since 1970. That's not a great situation, but historically it's quite low. Debt has been considerably higher for most of the 20th Century.

The financial difficulties we're having relates to the deficit, not the debt. This is the result of the financial crisis and recession, which resulted in a loss of tax receipts.

So the problems we're experiencing are basically a revenue crisis.

Here is your chart of Public Spending / GDP from 1970-2012:

www.ukpublicspending.co.uk/spending_chart_1970_2011UKp_12c1li011mcn_F0t

Public spending did indeed rise during the labour years (from 2000), but you can see that, at their peak, this was equivalent to spending during 1982 and less than 1975.

So yes, it was high, but hardly unprecedented.

And finally, yes, spending on the war is widely acknowledged to have brought the world out of the economic crisis of the pre-war period.

ttosca Mon 13-Aug-12 10:58:32

niceguy-

Exactly. And most people understand that the simple concept that you cannot continue to borrow forever. And now we realise that not even western governments can continue to borrow forever.

You don't know what you're talking about.

People need to start accepting that as a nation we've spent far more money than we should have and now it's time to pay some of this money back. And that's always painful as inevitably debt repayments cuts into money we could be spending on other things.

UK borrowing costs fall below Germany's

The UK government's implied cost of borrowing has dropped below Germany's for the first time in 2.5 years.

www.bbc.co.uk/news/business-15869094

---------

Can we afford to pay back the debt?

Of course it would be better to be able to spend the money we use to repay debts on something more desirable. But it does not mean that debt repayments are out of control. This graph shows the proportion of the wealth produced by the country each year that has been used to pay back debts during the last six decades.

UK annual debt repayments as percentage of GDP, 1948-2009

We can see that debt repayments have gone up in line with the debt since the recession hit, but they are still lower than in many years in the past.

Here's another way of looking at debt repayments. This shows what proportion of government spending goes on debt repayment. It's gone up in the last few years – but has been much higher in the past.

UK annual debt repayments as percentage of government spending, 1948-2009

Compare where we are today with what happened between the 1992 and 1997 elections.

Yes, our debt is going up and is higher than it was before the election.

But it's still lower than it's been for many years this century, and is lower than in many other similar countries.

Yes, it's costing more to pay back our debt and it's going up.

But it's lower than most years since the second world war. Just 6p in every pound of spending went on paying off debt last year, compared to 8p in 1996.

falseeconomy.org.uk/cure/how-big-is-the-problem

niceguy2 Mon 13-Aug-12 11:15:46

Ahh Ttosca how I've missed your long and rambling replies.

Your argument is basically "look, I know we've got a deficit but I don't owe THAT much....not compared to my mates and not compared to what I used to owe (after WW2). So where's the problem? We should keep borrowing!"

You sound like a couple I know who have multiple credit cards, remortgaged her house several times to pay for nice holidays etc as well as car loans and god knows what else. At the moment there's no problem at all. They can happily point to the fact they are meeting the minimum repayments and xyz is in more debt than they are.

But if they do not curtail their spending then sooner or later they will run out of credit card companies to borrow from and be forced to curtail her spending.

UK government is no different.

Attitudes thankfully have changed. Racking up debts to be paid in the the long & distant future is no longer a desirable thing.

ttosca Mon 13-Aug-12 11:37:12

They're really not 'long and rambling replies'.

I'm actually trying to inject some facts and figures in to the conversation. The way you keep talking, it seems like you live in a fantasy world with entirely different economic circumstances and history.

What has changed is the economic crisis, and this is seen by the ruling class as an opportunity to turn a financial crisis in to a sovereign debt/public spending crisis, and you happily go along with this.

It is entirely misleading to suggest the state was 'spending too much' on schools and hospitals because now, post crisis, in the middle of a recession, we have a much higher deficit.

No, the problem isn't that we spend too much money on schools. The problem is that we're in the worst recession since the 1930s, spent hundreds of billions bailing out banks, and refuse to go after tax avoidance/evasion which costs the country tens of billions of pounds annually.

Meanwhile, people like you, instead of targeting the people who are actually responsible for the crisis and recession, and instead of targeting those people (millionaires and billionaires) who can afford to pay more to help us out of the crisis, you complain about public spending on the most vulnerable and on essential public services.

It's really just nasty and reactionary. If your concern was really about economics and 'balancing the budget', you would go after tax avoiders, not pensioners and the millions who now find themselves unemployed thanks to gambling capitalists.

flatpackhamster Mon 13-Aug-12 13:19:13

You keep 'injecting facts and figures', but then you ignore anybody else's facts and figures which don't chime with yours. What exactly are we learning here, except that you're a Deficit Denier?

You keep pretending our debts are low, but there's PFI, there's the public sector pension deficit, the state pension deficit - £3 Trillion which is off the balance sheet but still needs to be found. And when you're told about this, you just ignore it as though covering your ears will make the big scary numbers go away.

ttosca Mon 13-Aug-12 15:37:40

You keep 'injecting facts and figures', but then you ignore anybody else's facts and figures which don't chime with yours.

No I don't, I'm still waiting for them.

What exactly are we learning here, except that you're a Deficit Denier?

I'm not that either, as I've already said that the problem with the UK economy is the deficit, and not the debt.

You keep pretending our debts are low, but there's PFI, there's the public sector pension deficit, the state pension deficit - £3 Trillion which is off the balance sheet but still needs to be found. And when you're told about this, you just ignore it as though covering your ears will make the big scary numbers go away.

You assert that this is a problem, but you haven't shown any evidence or figures to back it up.

Furthermore, even if the future debt or deficit is higher than at first apparent, this doesn't detract from the fact that the main cause of the deficit is the financial crisis and recession, and that we should be making the people who caused the crisis pay first, with tax avoiders/evaders contributing tens of billions second, before cutting essential public services to the vulnerable.

ElBurroSinNombre Tue 14-Aug-12 14:14:55

ttosca, We have been here before, many times.

I think most on here accept that the problem is the deficit and not the debt as you state. The question is how this deficit should be reduced.

When I asked you on another thread how we could reduce the deficit without making cuts in public services you said that we should take it from the banks (presumably via taxation). When I responded by asking whether you thought that taking ~£100 billion from the banks per year would affect economic growth, unsurprisingly, you did not respond to the question. To me, caning the banks as you have suggested many times, would deepen the recession less money would be available for lending to business. Most of us would like the banks to be penalised for their part in this mess but it is a lot more complex than just saying we should tax them more and carry on spending.

Your other suggestion for reducing the deficit was that we should not pay back our PFI liabilities and (quite rightly) you were completely ridiculed and quickly changed your tack.

Incidentally, the reason why UK's borrowing rate is less than Germany's atm is because the markets perceive that the course we are taking is a sensible one. It does not mean that we should simply borrow more money.

flatpackhamster Tue 14-Aug-12 15:18:13

ttosca

You assert that this is a problem, but you haven't shown any evidence or figures to back it up.

Why should I bother again when you don't read them?

Furthermore, even if the future debt or deficit is higher than at first apparent, this doesn't detract from the fact that the main cause of the deficit is the financial crisis and recession, and that we should be making the people who caused the crisis pay first, with tax avoiders/evaders contributing tens of billions second, before cutting essential public services to the vulnerable.

biscuit

niceguy2 Tue 14-Aug-12 15:30:16

Plus banks have not caused a £160billion per annum structural deficit. Government's have caused that.

So if you want to banks to pay then strictly speaking they should be paying the difference between the structural deficit and the actual deficit.

It does not mean that we should simply borrow more money.

Agreed. I had an email today offering me 0% credit card for a period of time. It doesn't mean I should borrow just because it's 0%. I still have to pay the money back one day.

ElBurroSinNombre Tue 14-Aug-12 20:29:09

The rate that the UK can borrow at is a reflection of the perceived risk of lending the money to our government. The borrowing rate would be a lot higher if we took the path that ttosca recommends (by not implementing spending cuts) - this relationship seems to be lost on him/her as he/she thinks the fact that it is low is a sign that we should be borrowing more.
To me, the current borrowing rate is the figure that is really important in all of this and it is unrelated to the historic debt to GDP ratio that ttosca keeps banging on about.

edam Tue 14-Aug-12 20:47:24

I think we can see where preaching austerity while printing money to pour into the gaping maw of the banks has got us - and it's hardly a happy place to be. They aren't lending money to business and they aren't stimulating the economy. We can see where a refusal to consider Keynesian economics has got the EU - and it's the brink of disaster.

Insisting on more of the same really isn't going to help. We can see it hasn't been working, it's not going to start now. If we are going to continue printing money, let's put it into the real economy - into the hands of businesses and consumers. Let's not pursue policies that are scaring businesses off expanding, investing and employing and having a similar effect on private citizens.

A couple of government ministers have woken up and realised the G4S debacle over the Olympics and the army, police and public riding to the rescue has challenged their assumption that private sector = good, public sector = bad. Let's see a similar injection of fresh thinking on economic growth. It'd be about time.

claig Tue 14-Aug-12 21:51:06

Agree, edam. And the public now appear to have lost faith

www.dailymail.co.uk/news/article-2187585/Coalition-crisis-Only-believes-Government-survive-2015.html

How did it get so bad, so fast. Where did it all go wrong?
How have the high hopes and elation at the election result vanished so quickly?

Can it be turned round or is this a one term government and a one trick pony?
Will the progressives be back in after only a 5 year gap?

claig Tue 14-Aug-12 22:04:02

Our athletes won a gold in the dressage, but the Coalition hasn't convinced the public with the message. It's almost as if policy is being run by the Sloane Ranger and Tonto. The stable door is open, the horse has bolted, the recovery has halted, the LIBOR rate appears to have been phony and some have described the policy as a load of old pony.

niceguy2 Tue 14-Aug-12 22:16:01

To be fair as Mervyn King famously predicted:

"....whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be"

This was my main concern going into the election that in effect Labour would avoid taking responsibility for the structural deficit they created and the painful austerity required to bring it under control. The Tories would get the blame.

I still fear MK may be right on this one although I hope he is not.

That said the coalition are doing themselves no favours either. Let's be honest, the majority of the public don't understand the ins/outs of LIBOR. Many won't even understand what a recession is other than it's a bad thing.

But what every voter does understand is public squabbling is wrong. The coalition are doing just that.

Going back on your word is wrong. The Tories have done that by reneging on the coalition agreement on the Lords.

And we all understand that two wrongs don't make a right. So the tit for tat of boundary changes is also wrong.

Whilst I feel the coalition will be a one term government (and Labour would be ousted in 2015 had they won a couple of years back), they obviously are doing themselves no favours at all.

claig Tue 14-Aug-12 22:18:07

The public likes a bit of comedy - a bit of Mr Bean, Mr Idle and Mr Trotter - they said that showed the world that we were eccentric, funny and a little bit bonkerz, but the public can't see the funny side in a deepening recession, blow that for a game of conkers.

Xenia Wed 15-Aug-12 08:04:04

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