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random_thought

Listed below are comments made by random_thought between Friday, 23rd October 2009 and Tuesday, 17th November 2009.

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Tough times ahead 00:09am on 17 Nov 2009 #55 glanafon

"Err could you explain, as I am a very simple man, where the wealth you are wanting to redistribute is coming from in this utopia you propose where 20 million work in a public sector providng services to 60 million+ and 2 million work supporting them through taxes. Could you also explain why anybody would want to be one of the 2 million doing the wealth creation. Please do not say the public sector create wealth or talk about gearing etc."

I agree, it is hard to get you head around. But wealth creation is not about money. It is about goods and services. And (apart from a few labour intesive sectors like health and education), the goods and services we actually need are produced by a pretty small number of people. What percentage of labour force is involved in producing food, water, shelter, heating etc? Not many. And most manufactured goods are going the same way - the actual cost of making TVs, fridges, etc is very low (mostly because of automated manufacturing processes rather than cheap Chinese labour). There are of course vital service sector jobs like plumbers and electricians, just as there are non-essential ones like bankers and advertising executives.

So I'm not trying to describe a utopia. Just what we have today. Maybe we all need to work 3 days a week and retire early - I'd be quite happy with that. Maybe we all (public sector and private sector) need to pay 60% income tax to pay it - OK fine (I'm currently paying a pretty large amount of money into a private pension fund which I confidently expect to be worthless by the time I retire, so I'd be quite happy to pay via the taxation system instead). The problem is there - how else would you suggest we fix it? I just can't accept that working ever longer hours to pay for a load of junk that we don't really want is really all that sensible.
Tough times ahead 11:41pm on 16 Nov 2009 #52 armagediontimes

"Maybe you would be better advised to look at whatever you have in your house and identifying how much of it has a UK source."

Actually I doubt if more than 5% of the overall value of my house and contents is imported.

We're beating ourselves over the heads with how we as a nation have failed to pay our way over the past 15 years. And I agree that the trade deficits of the last decade were an act of serious folly. But even if you sum together the balance of payments deficits of all those years, it comes to only a small fraction of the total personal, business and government debt that we now have.

In other words only 10% or so of our debt is external. The reast is internal - owed to rich people in this country (and to ourselves via pension funds). And therefore we can (quite easily) do something about it.
Tough times ahead 10:22pm on 16 Nov 2009 #2 jericoa

"How can it possibly be affordable to fund 25, 35..40 + years of retirement!!!"

Very easily, if you take into account that it only needs maybe 20 million people working in this country to keep the whole population in a reasonably comfortable state. And most of those would be in the public sector (health, education, police, etc). The fact is that to create the food, energy, housing and manufactured goods that we need only actually requires a few million workers.

The real problem is finding an acceptable way of organising the distribution of wealth and income in these circumstances. Having 50% of the population retired is one way. Having everyone working 3 days a week is another. The current approach of having lots of people doing non-jobs (in finance, public sector admin etc) and yet more people discarded from society (long-term unemployed, invalidity benefit) is probably the worst option. Personally I think the only "good" option is one involving high rates of personal taxation - but that is hard to sell in a democracy.
Tough times ahead 9:05pm on 16 Nov 2009 What the "Great British Public" has not been told is that there is actually plenty of money around.

It just happens to be "owned" by a smallish number of very rich people. The distribution of wealth in this country is now at its most unfair since 1929. Coincidence? I think not....

The very simple answer to our problems is a wealth tax. Over in Germany a few weeks ago there was actually a petition by a number of their super-rich asking for such a wealth tax - something like 10% of the wealth of the German super-rich would pay off all the debt built up in bailing out their banks. I would be very surprised if the same wasn't true here.

There's no need for low-to-middle income people to suffer years of austerity at all. We just need the decades of growing inequality to be corrected. Years in which the rich have grown so rich they couldn't think what to spend it all on, and so they lent their money to the rest of us as we got deeper and deeper in debt. And now they are lending it to the government as well.

Come on Gordon. Now's the time to make up for all these years of cowardice and groveling before the rich elite....
Not out of the woods yet 12:49pm on 05 Nov 2009 It's not really how much money they print that matters - but who they give it to.

- If they give it to consumers, they will either consume more and prop up the economy or they will pay off their personal debts.
- If they give it to businesses, they might avoid redundancies or bankruptcy.
- If they give it to the banks, they will just pile it into some new asset bubbles.

They keep choosing the latter, so the real economy is nose-diving, while share prices have gone up along with the bankers bonuses.
Is Britain growing yet? 11:14pm on 04 Nov 2009 Surely one problem with surveys is that they are by definition only asking those companies that are still in existance, and ignoring those that have just gone bust. So naturally the result will be skewed on the positive side - especially duiring a major recession when companies are going bust all over the place.

On a separate note, as I've said before we should exclude all data from the financial sector (banks in particular) in these figures, as we know full well that their profits are just "funny money" and not based on any real production of "socially useful" goods and services.
The economist's new clothes 12:44pm on 03 Nov 2009 Isn't a large part of the problem that the "economics" of the past few decades has been designed around how to make money for financial institutions rather than how to run a national economy? i.e lots of theories to predict short term changes in prices, but not a lot of thought as to how the processes for running an economy need to evolve.

Running an economy doesn't have to be about predicting short-term prices. We don't need these complex mathematical formulae to know that something in the economy is out of balance and will eventually have to be corrected.

- We know when the balance of payments is in persistant deficit.
- We know when house prices have become unaffordable.
- We know when personal and business debt has got out of hand.
- We know when the gap between rich and poor has got too high.
- etc

Without the complex mathematical models (which it turns out don't work all that well anyway) we may not know when these imbalances will be corrected. But we know that they will have to be corrected eventually and that the longer it takes the more painful it will be.

So the economics we need is one that tells us what processes to set up to allow these imbalances to be corrected as swiftly as possible. A system design for running the economy rather than simply a means of predicting how things will happen.
The Treasury hedge fund 11:58am on 03 Nov 2009 So RBS is the only bank in the GAPS scheme. Therefore the purpose of GAPS is to allow the Goverment to insure £282bn of dodgy assets which belong to an institution that is 84% owned by... the Government.

Is it just me, or does this all seem completely mad? A scheme by which the Government insures itself. Wouldn't the sane answer now be to fully nationalise RBS and have done with it? It seems like the taxpayer is already taking on all the risk with RBS anyway.
First draft of UK economic history 3:36pm on 23 Oct 2009 Fascinating arcticle at http://news.bbc.co.uk/1/hi/world/europe/8321967.stm

"A group of rich Germans has launched a petition calling for the government to make wealthy people pay higher taxes.

The group say they have more money than they need, and the extra revenue could fund economic and social programmes to aid Germany's economic recovery.

Germany could raise 100bn euros (£91bn) if the richest people paid a 5% wealth tax for two years, they say."

Exactly what is needed here too. Any chance of British multi-millioaries making the same offer?
First draft of UK economic history 11:57am on 23 Oct 2009 How about publishing a version of GDP that ignores the make-believe profits of the finance sector? Maybe then we could see what the actual state of the economy is.

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