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

[ttosca]

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

[MrJudgeyPants]

The planners go to great lengths to ensure that retail zones and residential zones are seperated as best as possible. What Sparrowp has pointed out are the implications of these decisions to people on the ground. In the same way, they are also responsible for the morning commute as everyone moves from one zone to another to go to work and then reverses their journey at home time.

I maintain that town planners really aren't all that useful to us.

[flatpackhamster]

That was planned. Planning consent had to be given by the local council or it couldn't have been built.

[Sparrowp]

I lived in a town where they clearly hadn't planned. There was a large estate built, all nice houses but no shops & no community services at all.

There was a big road around it.

Everyone had a 10 min drive to the nearest supermarket. They all got overweight.

[ttosca]

The world is led by businesses, unfortunately. Never before have the held so much power and control over the state as they do today.

That's why we're seeing crises and social breakdown.

The public are becoming increasingly agitated at this. We'll see a revolution within 20 years, I'm sure.

[flatpackhamster]

rosajam

Rubbishing all town-planners is ridiculous. Do you rubbish all social workers as well?

That was an extraordinary leap.

What part of my post did you disagree with? Did you think that the planning example I chose was somehow unrepresentative? It really isn't.

You seem to want the world led by business people ( which by de facto we are unfortunately) and these are not the kind of people you need when you are old and needy or if you are hungry in a drought ridden country.

I'm sick of mealy-mouthed socialists telling me they know better than me how to run my life. They can all fuck off. They don't know what they're doing.

The world isn't led by business people. The UK has so much boring, bullying, whining legislation generated by slope browed cretins in the EU and Whitehall it's a wonder anyone bothers to get out of bed in the morning, let alone runs a business.

[MrJudgeyPants]

"Do you rubbish all social workers as well?"

Not necessarily. Here's how it works. I tend to rubbish anyone whose contribution to society (other than pensioners and the disabled) is counterproductive, a waste of resources, needlessly expensive or impinge on my wealth, rights and freedoms and that of my family and my business - this is especially the case when I am forced under threat of violence (taxation) to pay for this frippery.

Quite frankly, as long as whoever runs the world follows these guidelines I would be quite happy. In practice, this tends to be those on the libertarian 'right' but if someone somewhere could square these principles with Marxism and its various subsets I would be very interested to hear about it.

[rosajam]

Rubbishing all town-planners is ridiculous. Do you rubbish all social workers as well?

You seem to want the world led by business people ( which by de facto we are unfortunately) and these are not the kind of people you need when you are old and needy or if you are hungry in a drought ridden country.

[MrJudgeyPants]

flatpackhamster "Town planning is a pompous conceit. It's almost never done well, and the healthiest towns are the ones where businesses can spring up according to local need rather than because the council says so."

I absolutely agree with this. I can see an argument for a service which ensures that buildings are built to a decent safe standard but that doesn't have to be a service provided by the local council, nor does it have to be so active in the minutiae of the build.

[flatpackhamster]

rosajam

Cutting lots of jobs in public sector - not sure we have toothbrush advisors but all the town planners are going. Useless people are they ? - is not going to create growth.

I can give you an anecdote for the uselessness of town planners. I live in a town which had large estates built in the 1960s. The planners decided each estate would be provided with an area with six shops and a pub. Nothing outside that area could be classed as 'commercial'.

Fast forward to today. The pubs have closed down and are having houses built on them , except for one, which has been closed down and has a supermarket built on it. A full third of the town is now publess. Thanks to the zoning rules and the planners, it's a 45-minute walk to the nearest pub.

Don't get me started on all the other mistakes they've made.

Town planning is a pompous conceit. It's almost never done well, and the healthiest towns are the ones where businesses can spring up according to local need rather than because the council says so.

This extra money once redundancy is paid for is surely going to be ploughed into unemployment benefits.

It's still cheaper than the salaries and the immense unfunded pension.

[MrJudgeyPants]

rosajam "Growth does not happen without investment."

This is not necessarily true and even if were, why do you assume that the investment has to come from the state?

"all the town planners are going. Useless people are they ?"

Mostly yes. I've mentioned on other topics how it is the planning system in the UK which is to blame for runaway house price inflation through the artificial restriction of land to build on. It's also town planners who apply the stupid rules where residential districts have to be in a different part of town to commercial and industrial districts. It is generations of town planners who are inadvertently responsible for your commute to work in the morning. Sure, separating the zones worked well when most industry was heavy industry, but now that has largely disappeared from our economic landscape, it might be time to re-evaluate the planning rules.

As for the aesthetic element of their job, take a wander around most towns and cities and tell me that if this town was planned, how bad could it look like if it hadn't been? My work has, in recent times, taken me to places like Hinckley, Grimsby and Widnes and - with apologies to anyone from those towns - they are eyesores.

"This extra money once redundancy is paid for is surely going to be ploughed into unemployment benefits."

I explained in my post at 15:20 why this assumption is demonstrably false.

[rosajam]

What I'm hearing is:

We are borrowing more money under coalition to pay our debts because the economy is stagnant. Growth does not happen without investment.

Cutting lots of jobs in public sector - not sure we have toothbrush advisors but all the town planners are going. Useless people are they ? - is not going to create growth. This extra money once redundancy is paid for is surely going to be ploughed into unemployment benefits.

Cutting where we can and investing to allow us to become a largely employed nation will make us be more productive. Depressed people do not make economies grow.

[MrJudgeyPants]

ttosca "Try firing the police, fire, and, NHS doctors and nurses, and the ambulance service and see what happens to services and the economy."

Blimey, you read my post carefully didn't you? Especially the bit where I expressly said "The question we need to ask is whether the work that we get out of a public sector employee is worth more or less to the country than their net wage. Would that this question be asked to the wider populace, I suspect that the nurses and teachers jobs would be OK, whereas Diversity Outreach Officers, Communication Facilitations Co-ordinators and other non-jobs would be handed their P45's moments before the door hit their arses on the way out."

So I say to you, try firing some cheerleading development officers, some street football co-ordinators or toothbrush advisors (part time) and see if anyone even notices.

[flatpackhamster]

ttosca

That's a very nice simple equation you have there, but I'm afraid you can't compare the economy to a personal budget.

Yes you can. That's exactly what you compare it to, because if you pretend that national budgets are different to personal budgets, that's an excuse to run up debts.

So please spare me these naive lectures about how we can fix the deficit by simply drastically cutting spending. Not only is it wrong, but it's evidently not working.

But we aren't cutting spending! As I've told you at least eight times spending is still rising. When will you accept this simple fact? Spending is still going up.

[MrJudgeyPants]

ttosca "...you still have other knock-on effects such as a lack of money being spent on consumer goods, reducing tax revenue from VAT, and a depression of businesses, which results in a loss of corporate tax."

Do the maths on my post again and you'll see that I added a pretty huge safety margin to my figures of how much tax the average individual pays. I still get to the figure of a saving of at least £12.5k and in reality it may well be (i.e. probably will be) more than that.

The lack of money being spent on consumer goods is far more problematic for the wider economy and its one of the reasons I favour tax cuts for businesses so much. Under your reasoning, private sector businesses who supply goods to public sector employees are, in effect, giving away their produce for free. Here's why; the state confiscates their wealth, the company then earns that confiscated wealth back by providing services or goods to public sector employees. It is, if you like, the flip side of the Working Tax Credit system whereby the state, acknowledging it takes too much tax from poor families, gives some of it back via a hideously complicated bureaucracy. Now, obviously, public sector employees have to consume stuff so some transfer of wealth between private and public is necessary; minimising that wealth transfer, through capping the employee head count, is essential. When Brown stuck another million or so on the governments? books (at a time of privatisation) he tipped the system towards being unsustainable.

"There are other factors to consider, such as the damaging effect long-term unemployment has on society and the unemployed"

This is absolutely correct but this is the social argument, not the economic one, which isn't the point you were making up thread.

"Another example is that personal households cannot simply print more money like the government can,"

This is the only difference between a household and a country with an independent money supply and a printing press. Even so, printing cash is not without cost and nor is it a solution to our current woes - not without causing rampant inflation.

"household borrowing costs many times more what it costs the government to borrow."

This doesn't make it a good idea for the government to borrow as much as it can for exactly the same reason as it wasn't a good idea for families to max out half a dozen interest free credit cards before the recession hit. Sooner or later circumstances change. Would you bet against this crisis dragging on for another five or even ten years? Who knows what the BoE will be paying on gilts in five years? time? I'd say it would be best to move forward hoping for the best but planning for the worst.

[niceguy2]

You can draw comparisons with the economy to a personal budget but of course there will be differences. But the principles remain the same and the analogies enough for most people to understand.

Public sector workers do an absolutely vital supporting role in our economy. But the simple fact is that they must be supported by the private sector. Yes we can't do without our police/ambulances and nurses but neither can they do without the private sector worker whom ultimately pay their taxes. The relationship is symbiotic.

So it only makes sense that when the private sector is in the shit, the public sector must take it's share of pain too. So when we're in the middle of a huge economic crisis, it only makes inevitable sense that the public sector must shrink since the private sector has shrunk too.

What is illogical is asking the private sector to pay more taxes in the face of declining income so the public sector can carry on regardless.

[ttosca]

Also, although you may prescribe to right-wing ideology which says that public-sector work is unproductive, this is nonsense.

Firing public sectors workers doesn't just reduce costs in the very short term (though potentially damaging the economy and increasing costs in the long term), but results in a loss of production of wealth: i.e. goods and services.

Public sector workers don't just dig holes in the ground to fill them back up. Try firing the police, fire, and, NHS doctors and nurses, and the ambulance service and see what happens to services and the economy.

[ttosca]

MrJudgeyPants-

It's a bit more complicated than that though isn't it.

Yes it is, which is why the economy is not like a personal budget. It's strange that you finish your paragraph asking how it is not, after showing that there are other cumulative and knock-on effects in an economy which are not present in a personal budget.

Again, the net money being paid out on welfare may be cheaper than paying to employ them directly, but then you still have other knock-on effects such as a lack of money being spent on consumer goods, reducing tax revenue from VAT, and a depression of businesses, which results in a loss of corporate tax.

There are other factors to consider, such as the damaging effect long-term unemployment has on society and the unemployed - who will find it harder to find employment, publicly or privately, the longer they remain unemployed.

Long-term unemployment is also socially damaging in other ways, in that it can lead to an increase of crime and drug use.

Another example is that personal households cannot simply print more money like the government can, and household borrowing costs many times more what it costs the government to borrow.

It's just silly to compare the two.

[MrJudgeyPants]

ttosca "Making tens of thousands of people unemployed by cutting spending which results in a loss of jobs means that the government welfare bill will also increase"

It's a bit more complicated than that though isn't it.

If you are employing tens of thousands of people on an average wage of whatever it is these days (£26k springs to mind) and you give them all the sack they will indeed all rush to sign on. The treasury will lose around £6k per year in payroll taxes and each person will push up the benefit bill by £3692 in jobseekers allowance (£71 p/w x 52 weeks). This is a total cost to the treasury of approximately £9.5k per year per unemployed person.

When they were in work they would have taken home a net salary of around £20k meaning that the overall saving to the treasury is around £16.5k per year. Even if every pound of their take home pay attracted VAT (highly unlikely) you would still see that the treasury is 'quid?s in' by around £12.5k. I haven't even mentioned pension liabilities yet.

One thing is mathematically clear; firing public sector employees is indeed a great way of reducing the burden on the treasury. The question we need to ask is whether the work that we get out of a public sector employee is worth more or less to the country than their net wage. Would that this question be asked to the wider populace, I suspect that the nurses and teachers jobs would be OK, whereas Diversity Outreach Officers, Communication Facilitations Co-ordinators and other non-jobs would be handed their P45's moments before the door hit their arses on the way out. Pretty much what we libertarians / neo-cons / right wing wankers have been saying since Brown started flashing our cash.

"you can't compare the economy to a personal budget."

You most certainly can compare the economy to a personal budget and I'd be very curious to hear why you think that you can't.

[ttosca]

flatpack-

This from the person who doesn't understand that If Spending > Tax Then Deficit.

I'm afraid you don't know what you're talking about. That's a very nice simple equation you have there, but I'm afraid you can't compare the economy to a personal budget.

The economy is a much more complicated machine. Tax receipts will go up and down depending on a variety of factors. It's not as simple as reduce spending in order to reduce the gap between revenue and expenditure. This is simplistic and naive.

If you actually cut spending so drastically that you harm the economy, then this results in a 'false economy'. You reduce spending in the short term, but your deficit will increase because you've fucked the economy and thereby also reduced your tax revenue. Making tens of thousands of people unemployed by cutting spending which results in a loss of jobs means that the government welfare bill will also increase, and income tax revenue and VAT will also fall.

So please spare me these naive lectures about how we can fix the deficit by simply drastically cutting spending. Not only is it wrong, but it's evidently not working.

[flatpackhamster]

ttosca

Hilarious lack of basic understanding of economics from flatpack.

This from the person who doesn't understand that If Spending > Tax Then Deficit.

Lord above, Ttosca, you're pretty quick with the abuse but seriously pignorant when it comes to the real world and actual numbers. But it was always the way with the far left - deal with the world not as it is but as you'd like it to be.

And that article doesn't say what you think it says.

[MrJudgeyPants]

niceguy2 "Governments can make sensible investments which can benefit us in the future. So for example a high speed rail link would be great for creating jobs in the short term and provide long term benefits in terms of making trade easier."

It very much depends on the numbers though. In the case of High Speed 2, there is little chance that we will get back the long term economic benefit that the £30Bn capex will cost. Sure, it will employ many people in the short term, give them a decent wage and reduce our unemployed head count but so would repeating the Joseph Williamson strategy of paying one group of people to dig holes and another lot to fill them back in again! Williamson's motivation was to reduce unemployment too and he leaves to posterity the wonderfully politically incorrect quote that his workers "all received a weekly wage and were thus enabled to enjoy the blessing of charity without the attendant curse of stifled self-respect."

The trick is to find cheap ways to boost productivity. In this instance, GB PLC would benefit far greater by the provision of free Wi-Fi on existing trains rather than knocking ten minutes off the journey time of a rich man's toy.

In the same vein, we are in the hiatus between the Olympics and Paralympics. Tens of thousands of people have been employed delivering the games (at the declared cost of nearly £10 Bn, but rumoured to be running close to double that estimate) yet in a few days? time the stadiums will shut and there is not a chance in hell that the legacy will pay back the cost of the build.

It's similar with renewable energy. We are constantly told that the economic benefit of lots of new windmills is lots of jobs. I disagree that this is a benefit, employing lots of people means lots of wages to be paid from our household bills. Ignoring the global warming argument for a minute, why would we want to pay lots more money to employ thousands more people to give us something exactly the same as what we already get by employing a mere handful of people?

Just employing lots of people isn't a benefit in itself if the end product is of little or no value to the country and its subsequent economic performance.

[niceguy2]

It depends flatpack. Government's can make sensible investments which can benefit us in the future. So for example a high speed rail link would be great for creating jobs in the short term and provide long term benefits in terms of making trade easier.

But the issue is can we trust the government to pick the right things to invest in because politician's are usually influenced by short term electoral gains than long term economic gains.

[ttosca]

Hilarious lack of basic understanding of economics from flatpack.

Anyway, from today's Torygraph:

Kate Barker: Osborne's austerity could be 'self-defeating?

The Government?s austerity programme risks becoming ?self-defeating?, the Chancellor has been warned by Kate Barker, the most senior economist yet to intervene in the debate over growth.

Ms Barker, a former Bank of England rate-setter who is spoken of as a potential Governor, said George Osborne had left himself no ?room for manoeuvre? to combat the recession by insisting that he can not budge from his debt and deficit reduction targets.

?There is a risk that the fiscal mandate, rather than a useful discipline, will become a straitjacket,? she added.

In an explosive report for the think-tank CentreForum, Ms Barker also called for changes to the Bank?s inflation target, raised questions about the effectiveness of more quantitative easing (QE), and said the Treasury?s reforms to financial regulation were ?flawed? and would overburden the Bank.

Mr Osborne is already under pressure from economists and business leaders to relax his spending cuts and tax rises to boost growth. Yesterday, Adam Posen, an outgoing member of the Bank?s rate-setting Monetary Policy Committee (MPC), joined the Chancellor?s critics by calling on him to use Britain?s record low borrowing costs to increase targeted spending.

?As long as interest rates are as low as they are in the UK, it doesn?t make any sense to sit on the money,? he said.

Cont'd...

www.telegraph.co.uk/finance/economics/9493022/Kate-Barker-Osbornes-austerity-could-be-self-defeating.html

[flatpackhamster]

niceguy2

I don't think anyone is arguing that we don't need investment.

I am. Government 'investment' - isn't. Government spending (on new rail lines, for example) can a tool to allow businesses to develop but it is not, by itself, a solution to a depression.

The solution to a depression is, in this case, about 15-20 years of low growth and high debt repayment. A generation of misery, to pay for three generations of tax-and-spend politicians (mostly, but not all, Labour).

The problem is where do we make cuts to get the funds available and what do we invest in.

That's a second problem, of course. Taking out loans to build stuff doesn't create anything except debt.

[MrJudgeyPants]

rosajam What's the difference between subsidising industry and cutting its taxes?

Also, the 'austerity' program has hardly started. We are still borrowing colossal amounts of cash each month and taxes on business and individuals in work have hardly altered. The cuts that have happened so far were little more than pruning some leaves off a tree when, in reality, a chainsaw needs to be taken to the branches.

A house building program would be a very sensible idea but reform of the planning system would be more welcome allowing house builders to pick up land for private dwellings at a cost far below its current inflated prices. As I've said before, the most expensive bit of house construction isn't the bricks and mortar; it is the permit to build on that land in the first place. I'm going off on a tangent here, but it is this mechanism which is the driver behind the rampant house price inflation we've seen and which is partly responsible for holding back the economy.

Finally, governments tend to have an awful track record of picking winners. Look back at some of the nationalised industries that we've had. Barely a success amongst them. (Please no one mention railway and utility privatisation, these were botched and I could write whole essays on what the government did wrong when it sold them off!).