A fairer society?
One of the most striking trends of the past three decades - which became particularly pronounced again in the last few years - has been a widening in the gap between the poor and the rich, with the gap between the very poor and the super-rich expanding at an almost exponential rate since 2003 or so.
Well, in this grim year of serious economic slowdown and rising inflation, our society is becoming more equal again, on most measures of income and wealth gaps.
Part of the reason is that the super-rich have been battered by the turmoil in financial markets and by falls in the prices of shares, commodities, properties and other assets, just like the rest of us.
So investment bankers are lucky if they're still in a job - and bonuses this Christmas will be shrivelled and rare.
There'll be fewer humungous payouts to partners of hedge funds and private equity firms. In fact, with debt so difficult to raise, many of these firms will be lucky to be alive in a year or so.
Also the oligarchs and plutocrats of the newer, faster-growing economies are nursing losses on their exposure to markets, such as the Russian stock exchange, which are melting down.
A duo of oligarchs, who only recently were giants of global capitalism, Oleg Deripaska and Alisher Usmanov, have faced demands from bank creditors to hand over substantial assets (the odds of an Usmanov bid for the Arsenal are now presumably rather longer than they were).
The king of steel, Lakshmi Mittal, is less flush than he was.
And with the oil price having more than halved in just a few short months, there's less wonga bulging in the pockets of the potentates of the Middle East.
So the crunch is coming, later than for most of the rest of us, to the very very top end of income and wealth spectrum (though don't weep too much for them, because most stashed away enough cash in the boom years to weather the storm in some style).
But what about the very bottom?
Well for those in low paid, insecure jobs, the outlook consists of below-inflation pay rises and possible redundancy.
However, if you are living on benefits or you depend on a state pension, there's strikingly good news.
Your state-funding income will rise in line with September's retail prices index or an adapted measure called the Rossi index. And both inflation measures have been rising at a faster rate than we've seen since the early 1990s.
So the RPI, which determines increases in child benefit, incapacity benefit, disability allowance and state pensions, is up 5 per cent.
And income-related benefits (such as housing benefit, income support and jobseeker's allowance) should be increased by the 6.3 per cent increment in the Rossi index.
What that means is that after many years of receiving a smaller and smaller share of the national cake, those who depend on the state for their income will actually receive bigger pay rises than almost anyone else - and their share of national income will rise.
It may seem rather odd that those on benefits tend to do best when the economy is in the pits - but actually that's not unusual (it happened in the early 1990s too). But this time they'll do disproportionately better, because of the inflation we've imported from rising energy and food prices.
So what we're seeing is something of an uplift for those who are poorest, and some of the froth blown off for those with fabulous wealth.
In the middle, however, which is where most of us live and work, it'll be a year of squeezed incomes and fears of redundancy.
So most won't see this narrowing in the gap between rich and poor as a sign that our society is becoming fairer.
PS These increases in benefits and pensions will probably lead to further increase in public sector borrowing. But many economists would see that as a good thing, since the recipients of increased benefits and state pensions usually have to spend the lot just to have a dignified existence - and that additional spending would be good for all of us if it were to inject a bit of extra oomph into a weak economy.
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Good. Although I really doubt there will be significant change in the difference between rich and poor as a result of this.
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Spin.
A good trader / investment banker working over the past 10 years can retire if they want to.
The "bankers" that have been hurt will be the support staff, dreaming of that golden ticket, whilst leveraging up the family for posh private schools and bigger houses.
Not sure a pensioner on state pension is really going to "catch up".
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Interesting article Robert. Just one observation though.
Everyone's inflation rate is different and those at the bottom of the imcome brackets are likely to spend proportionately more on food and energy.
These inflation rates are still much higher than average.
That said, were commodity prices to continue to fall, this could back up your argument even more.
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A deep inequality, Robert, is that between guaranteed public pensions or private final salary schemes, and private money purchase pensions/annuities which are at the mercy of the markets. So even in the middle ground where there is now greater equality between public and private pay, the inequality in retirement will be vastly increased.
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I see. So your definition of fairer appears to mean that those who sit on their backsides and do nothing are taking an increasingly large amount of dosh from those of us who do?
Oh, and that we're having to borrow to pay it?
Only on the BBC....
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It's interesting you bring up the super rich becoming much poorer. Does this mean that the secondhand market in megayachts has collapsed? Maybe they will be repossesed and sold off at knockdown prices...hhmmm, I wonder what the LTV requirement will be in these new tough times. If only we still had self certified ninja 125% loans. Admittedly I would have defaulted in the first month....but what a month that would have been!
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I see you've been doing as suggested, Robert. Well, if the Upper House doesn't appeal, how about persuading Dinger Bell to stand again for the Lower House? Thirty years of Conservative policies under whatever name should not be followed by five more under the Tories under these circumstances, we need a true Socialist party as well.
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"PS These increases in benefits and pensions will probably lead to further increase in public sector borrowing. But many economists would see that as a good thing, since the recipients of increased benefits and state pensions usually have to spend the lot just to have a dignified existence - and that additional spending would be good for all of us if it were to inject a bit of extra oomph into a weak economy.."
Pensioners certainly need the help after years of derisory pension increases while MP pension pots get fat at our expense. They've paid their NI stamp, they deserve a decent retirement.
For some in the benefits system it is less equitable. For the last decade Brown has in part used the benefits system to keep the retail industry ticking over.* The incentive is there to spend all that they are given or their benefits get reduced, and by God they do spend it. On drink, Sky, plasma tellys, mobile phones and foreign holidays if the ones round here are anything to go by. There is nothing dignified about their existence.
It's meant to be a hand up not a hand out.
* Much as he has been happy to see house prices bubble so mortgage equity withdrawal could do the same.
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If those on fixed incomes were to get this meagre increase immediately then fair enough but any increase does not come into effect until April 2009.
If some haven't frozen or starved to death by then there will certainly be no scope for them to spend.
This one had to come out of Downing Street Robert.
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Don't let the first breeze fool you, there is a storm coming. What will rich-poor gaps matter when we have higher than 10% unemployment and a million repossessions?
Fair and equal are not the same. Equal poverty means fairness in your world? What is fair about being in the middle and having your wealth taken away because the guy at the bottom has nothing because the guy at the top has lost money and fled? Face it, those of us who are lucky enough to keep our jobs will be forced to pay for this mess. I don't call that fair whatever the shape of some think tank's fancy diagram. I call that hard luck.
"A rising tide floats all boats," that saying works well in reverse too.
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If we do not impose heavy taxes on the rich immediately they will rush out and waste all their money on structured investment vehicles, collateralised debt obligations and all the other acronymical soup that has recently bedevilled our lives.
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Crazy.
The Middleclasses who might be small shareholders or who might have a mortgage or who might have a pension plan, have been wiped out by the financial crisis.
Yes, we are more equal, the middleclasses are now as poor as everyone else, and getting poorer.
The real rich people, who own farms, vineyards, private companies, Treasury Bonds etc, etc, are still rich and likely to stay so, inflation or crisis notwithstanding.
The people in the middle, will have lost on their Pensions, their Shares, their House value, and possibly their career if they are laid off in the downturn.
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Of course Inflation will wipe out Money on deposit far faster then money invested in Farmland..............
And ordinary folks are most likely just to have a Savings Account if they have anything at all.
Interest rates are on there way down, they will fall faster on deposit accounts than on Mortgages as people are already seeing.
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Does anyone else feel that Cameron and Osbourne are just making up their latest speeches from various postings on these blogs?
Its uncanny!!!
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Robert is looking for a silver lining but I think he has only found an anomoly the reduction of some relative poverty within our borders, wheras I fear that what is happening will throw more people worldwide back into absolute poverty. The possible silver lining that I see is the growing awareness of our global economic interdependence, China and the middle east need our markets we need their products, damage one and the rest suffer also that we can only thrive in a mixed economy with private enterprise as well as international regulation and international initiatives from governments in cooperation with each other, if we can really learn this we could be at the beginning of something really good.
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FrankFisher dont make the assumption that all ppl who claim benefits sit on their backsides and do nothing, i certainly don't i have two children to bring up. am i wrong for wanting too raise my own children?
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The extremely rich may be having a tougher time of it, but you wouldn't think so if you were running an air charter business.
A friend, who runs Day Aviation, reports that there is no decline in business despite the economic turmoil we're living in, and he's still flying clients including top business executives and Royalty.
If anything, he says, using a bespoke air charter service might even be cheaper for them than flying business class, particularly as they can fly where they want, when they want, without having to arrive hours early at an airport that might be out of their way in the first place.
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Dear Robert-have you ever lived on benefits? Contrary to the picture painted by the Daily Mail, not everyone is sitting on their backsides sipping champagne and smelling the roses.
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Will we be throwing the quarter of a million or so people who will have lost their jobs by Christmas and be forced to sign up for jobseekers allowance in under the comfortable umbrella of 'scroungers'?
Or has the Daily Mail come up with a fluffy term for them yet?
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So the salary earners who have lost their pensions will be laid off, but that means they'll get bigger benefits rises, but they won't be able to pay their mortgages, and the banks that are short of cash will be repossessing their homes, and the only market for houses will be social housing projects, because nobody will be able to get a mortgage.
Fortunately the lower price of cheap whiskey , protected for so long, will mean that we can all drink ourselves to oblivion which will boost the economy.
Truly a Nu-Labour paradise.
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If we live in a meritocracy, then winners will win and losers will lose, everyone finds their level. Or are you arguing for equality of outcome, in which case whats the point of making any effort? Over taxing someone who is successful to placate the bleeding heart liberal's concern for the unsuccessful is a recipe for a brain drain - remember the 1970's? The fact that Mittal/Gates/Duke of Westminster have billions has no effect on my life, yours or anyone elses, except in that what they purchase in cars, planes, yachts, expensive jewellery, furniture, electronics, etc provides work for hundreds or thousands...
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I am not sure the Hon. Robert Peston is really the most appropriate person to talk about this - coming from a family that bought my family's home some years ago as their seaside retreat.
This sort of posturing as 'one of the people' doesn't really help his credentials as a reliable source of information and sensible perspective on the very real issues impacting on the majority of people.
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@14
well if thats the case maybe at last we will get a true leader. even though i very much doubt it.
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so the hyper rich will loose a bit, in reality they wont even notice.
where the low paid getting below inflation rises will feel the crunch heavier due to cost of living increases.
sadly the government will fail to do anything substantial becouse it would involve them making real decisions that would upset there paymasters.
the gap therefore remains and this coming winter will see many older or less well off having to suffer unduly having to reduce amount of food and power they have or use, who will help them.
this government has failed the people it is in place to protect infavour of helping inept bankers and market traders, being greedy is fine but at the expence of the people i think its insulting and contemptable, and any deaths due to poverty in the coming winter should be fully placed at the door of number 10 and the rest of the government.
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Ask yourself - just how sustainable is all this debt when the economy is sliding into depression because of all the debt we have build up. Rich, poor, in the middle, it won't make a blind bit of difference. The most likely to survive the forthcoming turmoil are those who are self-sufficient in water, heat and food.
How long before the good old US of A defaults on their $trillions of loans? 'Cos when they do, and it really is when not if, we won't be far behind them. How much longer can governments create more debt in order to attempt to bail us out of the position of having created too much debt? Who will buy all this new-for-old debt - surely the Chinese and Middle East are starting to run out of money themselves!
Furthermore, we are already seeing massive declines in shipping rates - and if the ships ain't moving then neither is any of the stuff they usually haul around the world. The ships ain't moving because the banks won't issue credit notes, and the suppliers won't ship without a guarantee of payment. If there ain't any stuff to buy, it doesn't matter how much you have in the bank - you'll end up hungry and cold just the same and the depression will get worse.
There are plenty of good websites out there explaining what is really going on - try www.globaleconomicanalysis.blogspot.com or www.dollarcollapse.com or www.webofdebt.com/articles for starters.
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@5
Well i must say the way you have wrote this blog robert you have to feel sorry for the ones in the middle. there getting it from both sides. if its not the rich taking the lion share then its the poor. even though i suppose people must also understand that jobs will go and that these people did have good jobs untill the rich and the goverment sealed their fate. i guess some on here must be rich. because if not how do they know there job is safe?
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so, the 'super-rich' are slightly less super-rich than they were. so what? they've still got waaay too much money! they've got no concept of how ordinary people 'have' to live, and what they have to put up with. don't get me wrong-i've no problem with people doing well by working hard, coming up with a good idea or two, or by creating employment for others. it's just that there's a limit to how wealthy someone can be before it becomes vulgar, and even disgusting!
i'm not one of those bitter types who'd like to see them lose it all, but i'd dearly love them to pay their fair share in tax! ...while some of us pay a disproportionately high level of tax.
it'll NEVER happen, of course!
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re the growing gap in income distribution:
http://uk.youtube.com/watch?v=R_-FTRZMwVw
on a more serious note, robert forgot to mention that fiscal policy in an economic downturn is normally designed to favour the poor, as they are more likely to spend the extra money they get from the government (and not just save it), thereby boosting aggregate demand.
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I'd sure like to think that the rich are going to bear the brunt but it never turns out that way, does it?
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Sorry Robert - Just what point were you trying to make.
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deutsche bank has been one of the most responsible of all the leading banks throughout this crisis imho:
http://www.bloomberg.com/apps/news?pid=20601087&sid=ayQthNkiaLoM
disclaimer: i used to work for them.
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Blanket statements about what is happening to each section of society seem to be prevalent at this time. Of course, society cannot be pigeon-holed so easily, "middle class" neighbours with similar income and similar family situations might have very different responses to the current situation because one works in a 'safe' industry, whilst the other is in self-employed, one might take luxury holidays whilst the other goes camping so they can pay down their mortgage.
I think one impact of the current crisis will be that many more of us will manage our lives with a basic consideration of 'risk' - less personal leverage, diversification of our investments/ pensions, keeping higher levels of assets in cash - and diversifying where the banks at which we hold that cash.
We are all risk managers now.
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The four phases of Capitalism over the centuries:
The rich exploit the poor,
The rich exploit other countries poor,
The middle class exploit each other,
The middle class pretend to exploit each other and the super rich get richer.
Somehow Robert I can not feel a great deal of sympathy for the super rich - they are probably being exploited by the maga rich.
Now dont't get me wrong I am not a socialist but I am worried about the world my small grandchildren are going to have to navigate!
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Robert Peston writes a sympathetic article and the Daily Mail moaners are out!
You might not admire the lifestyle of the poor, but if ANY who complain about working hard for loafers read some history then you'd see that the poor are people who have lost every battle in history, have had everything taken, have had to borrow just to keep their self-esteem - and they're about to suffer for that by the way - because they had parents that a) didn't love them b) abandoned them and see a) c) parents who beat them, moaned at them incessantly and treated them with contempt d) are terrified of trying because they've been humiliated so many times by the people that supposedly 'love' them e) don't know anything and have missed out on the brain growth of early years.
That is my experience of the poor. No one says you have to like them. But think of this too, there are constant adverts chasing down benefit cheats - most of whom make a weekly wage out of it. Not a fortune. I've never seen an advert about a corporate tax dodger (evading millions of tax), an offshore fund that contributes nothing to where it takes its profits from (evading millions of tax), or the an arrest warrant for Russian oligarchs who stripped Russia bare and sold up to international companies for hundreds of millions having bought something that they had no right to buy from those that had no right to sell while over 60% of the country tumbled below the povery line. And YES, it does have an effect that someone like Bill Gates has $56 Billion because as we are finding out the hard way, the Romans were right - wealth is public. Its power is social and what people do with it can destroy not just a life, not just a few lives, but millions of lives. See the next few years for a quod erat demonstrandum. (And that's not envy speaking.)
There isn't an equal starting line and anyone who thinks there is needs their head examined...or better...read a book.
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Half of U.S. bank deposits are in those nine large banks, with the remainder spread across the country in smaller firms. Any delays by the Treasury in getting money to the local level threaten to slow economic growth in areas where job losses are mounting and consumer spending weakening.
http://www.bloomberg.com/apps/news
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Robert,
I agrre it is tough living on GBP 60.50 max a week Jobseekers Allowance but, given the cost of living increases, do you really think that a potential increase of 6.3 p.c i.e. GPB 3.81 per week is a cause for celbration by the 939,000 JSA claimants ... a million by Christmas!!
We'll still be on the breadline!
The biggest issue for newly unemployed home owners, which few in the media have picked up on, is paying their mortgage interest - currently no state help for 39 weeks i.e. nearly 10 months and then only for GBP100K advances!
NB Payment Protection Insurance is acknowledged to be yet anither rip-off so why does the Govt rely on it when making policy?
Super Gordo feels for us so much, this qualifying period will only be reduced to 13 weeks from April 2009 for GBP 175k advances.
How much savings do you have? Covered?
A cynic may observe that the lights in Whiehall will not burn this weekend because immediate action/ bail-outs for UK victims of the recession is not vote winning or worth bragging about to other world leaders!
Why do we just have to wait for the repossesion crisis to hit the front pages before this government wakes up?
We would be a true Banana Republic if Gordon had not mortgaged them to save the bankers!!
Yours
Disgusted and broke!
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Oh for goodness sake it's simple... Unless you happen to believe the CPI, RPI figures and other mythical beasts like fairies and unicorns.
Inflation moves value to assets, money becomes exponentially more worthless (14% per year in the UK[1]) and the value of people's savings and salaries plummet with it.
Deflation does the opposite. It moves value to cash and devalues assets. Hence all the screaming and shouting by banks and governments.
The whole purpose of the stock market since 15th August 1971 has been to capture inflation. It is called "capital growth". In fact it's simply the devaluation of the currency.
Most of the poor suckers who have to work for a living have no idea what's going on. 2.5% pay rises while the money supply has been running at 12% - 14%.
[1] Bank of England money supply statistics:
http://www.bankofengland.co.uk/statistics/m4/current/
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Somehow I can't make myself feel sorry for the super rich who may have lost the odd billion from their multi billion pound fortunes. They can all still afford to live in the kind of luxury that most people can't even dream of, let alone aspire to.
As for the bankers and traders, the ones who are responsible for this mess have got fortunes in the millions from the bonuses they made from dealing in things that they probably didn't fully understand, with someone elses money, most likely it was hard earned pension fund money belonging to ordinary folk, and can afford to still live comfortably and have few money worries.
The people who are going to suffer are the lower middle class and the ones on the bottom and on benefits. Anyone who has never had the misfortune to be on benefits might think it is a cushy number, but as someone who worked hard for the first 20 years of my life, only to end up medically unable to work due to failures in the NHS, it is far from cushy, and 5% of not a lot is surprisingly enough, not a lot!
Before people go on, I don't smoke, I don't drink, and I don't have a huge plasma or LCD TV or the latest i-gadget, my TV has seen over a decade of use, and so have the rest of my few possessions, all bought before I got unwell.
Anyway, back to the business in hand, this crisis is just a typical market re-adjustment. The super rich and the rich never actually end up much the worse off, other than a few who took far too many risks. The banks still get their pound of flesh from people who default on their mortgages by repossessing their home and selling it on, lets face it, the "money" they lent to the defaulter only came into existence the moment that they signed the mortgage contract, it was created out of thin air using the miracle of fractional reserve banking. The biggest loss maker will be your pension funds, that is the money that you thought was going to give you a nice little nest egg to retire on after a life spent working.
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It's still a long, long way to a fairer society, I'm afraid.
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It might come as a bit of a shock Robert, but trickle down works. Not just the good comes down but the bad too.
Inflation and the lack of credit will hurt the poor more than the rich, and that is very much for sure.
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Robert,
Re my earlier post ... I forgot you're a numbers man so any advance on the following
UK GDP GBP 1,401bn
UK Bail-out package GBP 387bn
(maybe more, I've lost count!)
Annual Jobseekers Allowance payments to July 2008 GBP 2.3bn
Who was it that said ... The mark of a civilised country is how it treats its poorest citizens.
Yours
More disgusted and still broke!!
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"PS These increases in benefits and pensions will probably lead to further increase in public sector borrowing. But many economists would see that as a good thing"
Given the parlous state of public finances thanks to Mr Brown deficit spending during the years of growth, I really don't see how any economist could see a "further increase in public sector borrowing" as a good thing - after all, Government borrowing is simply deferred taxation and putting the day of reckoning off into the future.
As for people on benefits, I really cannot see any extra spending by them compensating to any degree for the general slowdown in the economy.
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Everyone keeps concentrating on a handful of rich bankers that might lose their bonus this year. Some of them have turned their bonus down voluntarily, how great of them. After they have driven their business to the wall and cost the taxpayer billions.
I have a few problems with the way the media is trying to present the situation.
Firstly, there are not just a handful of bankers responsible - there is a small army of middle and upper managers and traders that created and traded the toxic assets and credit swaps, and for which they got enormous bonuses for many years.
Secondly even if we put all those bonuses together we still cannot amount for the billions of pounds lost.
Thirdly, where is Brown going to get all that money from to buy shares and loan to the banks? 50 billion pounds here, 250 billions there. The answer: he will print the money, that is where. He encourages other governments to also print money so the pound does not collapse in isolation.
What will be the price of a loaf of bread and a pound of cheese, once this money has been printed and has circulated? Probably double what it is now.
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Surely Robert the banks have got to start lending soon otherwise the wheels of the economy will well and truely sieze. thing is i really do think that the banks really are short on the dose. and even if they have money then why when the likehood the price of a house is going to drop by some 40%.Would they do this. and not only that even if they was to then you have to ask why would anyone want to buy a house knowing its going to lose money straight away. the outlook looks very grim indeed.the funny thing is we are at least 500,000 houses short in the uk. there are many younger adults still living at home with there parents. reason being quite simple they where priced out of the market. so i suppose soon they will soon have a chance to buy. but this wont be till houses hit there real value. this could well be at least 12 months away. by that time i exspect some 5 to 10 million houses to be in negitive equity. which in it self could bring house down by a that is actually below what they should be.
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Always the lower middle classes who suffer.
Single mother Sharon and city type Crispin will do fine. As for the super-rich - a new moral landscape will surely evolve out of this mess, and these men will be held to account in some way.
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Dear Mr. Peston,
I find your blog unusually succinct and informative. Thank you.
Re the credit crunch. How about sorting out the problem at its roots. I belive the sub-prime mortgages started off at a low rate for 2 years or so and then jumped. Why not keep all these mortgages at this same low rate then there will be less angst, less repossessions and these sub-prime mortgages should now be not so sub.
In the US the Bank rate is low enough to support this and all we have to do is drop our Bank rate a bit here and then we are all in the money.
I did read one reason why this should not be done is that it is not the government's business. Well, a lot of other things seem to be, so why not this?
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#22 "I am not sure the Hon. Robert Peston is really the most appropriate person to talk about this - coming from a family that bought my family's home some years ago as their seaside retreat."
This is a contemptible remark - a personal attack on Mr Peston and his family - shame on you! Mr Peston is qualified to talk about this because he understands his subject. It is his duty to talk about this because he is being paid by the BBC ie us, to help inform the public - carry on the good work Robert!
#40 #It might come as a bit of a shock Robert, but trickle down works. Not just the good comes down but the bad too.#
If trickle-down works, why is it more difficult for young people from poor or even not rich backgrounds to go to a good university to study a real subject? In the 1970s, I was paid a grant to go to King's London and study Maths and Chemistry. I then went into teaching in the state sector. It would not be possible today. The costs of studying in London are now prohibitive, even if you are prepared to take on a huge burden of debt. King's Chemistry dept, one of the best in the world, closed down, partly because it was expensive to run, and partly because it couldn't get enough properly pre-qualified students to maintain its standards. This is a not untypical story. As a consequence, there is a shortage of qualified teachers in specialist subjects on the National Curriculum.
My point is, that while the very rich were taking an ever increasing share of the allegedly increasing national wealth, there was not enough of that wealth to invest in the real education necessary for the future of this country. I have a horrible feeling that the apparent expansion in "higher" education is partly a scam to keep young people off the unemployment register and, by the student loan scheme, eventually to pay the costs of this scam themselves.
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What I see is the frightening speed of job losses and home repossessions as they are happening.
We have a government that has been in complete denial of recession and is totally unprepared for the mayhem to come.
I was around in the 80's recession but believe me it was nothing like this.
Large numbers from the mines and the shipyards to steelworkers and other manufacuring industries lost their jobs but they were highly compensated. The unions saw to that.
What we see now are redundancies and business failures from across the whole spectrum with little or no help to get them through what will be traumatic experiences.
It doesn't matter which class you belong to any more no one is immune from this.
Gordon Brown can kid people at the moment but as it dawns on everybody that no one is really there to help them and they are well and truly on their own he will have a lot of public dissent on his hands.
It is only a matter of time now.
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Pretty soon the deadbeat in the gutter next
to me shall be able to relate an interesting
career history.
This almost makes me want to masquerade
as an AIG executive so that I can get a bit of the
good life at one of their career retreats before
the party ends.
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Oh dear.
Oh dear, oh dear.
Oh.......
You will note I am at a loss for words.
Mr Peston has left me gob-smacked.
A first.
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Have no fear Gordon has a cunning plan to torpedo this - change the increases to be in line with average earnings not inflation. Supposedly because earnings grow faster than inflation in the good times.
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don't you think this post is a bit of a wind up, to deliberately provoke responses!
It certainly had that impact whether it is or not.
Those who are super rich will stay that way by most normal measures. Unless of course they choose otherwise and decide to give/gamble/fritter etc.
My details can be made available for this.
But as we say round these parts.
Yer dont get somit for nowt.
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The day that this blog became overtly a political trumpet for Gordon Brown's Labour.
Shame on you.
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Labour's obsession with 'fairness' is a misplaced and counterproductive notion. Since when was life fair? What's the point of artificially manufacturing society to be 'fair', so that we can't distinguish between reward for effort and zilch for idleness.
According to Labour, everyone deserves to be somewhere in the middle - that's 'fair' - and the normal rules of human psychology and behaviour have to be suspended whilst Labour rules the nation. As my dear old mum used to say "Life isn't fair".
The best approach is to create the economic and social conditions that allows each person to pursue their own goals. Some will strive for greatness (financial or non-financial) and others will loaf about. Leave it at that. That's fair.
Let's not let the Labour Party try to shoehorn us all in to the Fair Box. How communist (dire) is that?
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34
Have you ever been to a council estate and actually had to speak and deal with these people on a daily basis? They don't sit destroyed because they feel social and economically deprived. This is just a means of explaining and justifying the feral lifestyle they choose to live.
See the evil poor link below:
http://nightjack.wordpress.com/2008/06/17/darkness-at-the-edge-of-town/
If you give the good poor some power things will improve, but if Society is prepared, because of guilt to let the evil poor run riot over the good poor then you can forget it.
The reason that benefits cheats are chased down is because they are cheating. The Government quotes the average household incomes, but this does not reveal the true picture. I personally know of a pub in which 14 of the regulars are claiming benefits whilst working as roofers, window cleaners, gardeners, builders, metal tatting, decorators, carpenters. They regard it as a way of life to have the housing benefit, council tax benefit and job seekers allowance paid. Plus with children they get a lot more.
Far from suffering from a lack of confidence and self esteem they take great pleasure in taking the system for a ride. Not everyone does but many do.
The revenue has indeed being advertising that they will crackdown on offshore dealings:
http://www.timesonline.co.uk/tol/money/tax/article1875552.ece
Probably not reported in the Guardian.
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I hate to say it, but there?s little point moaning on these blogs about the injustices of the current situation.
Those in power will simply not be diverted or swayed from their already predetermined paths by the written or spoken word, however eloquently laid out or argued. They do not listen to your protests. If they did, we would not have gone to Iraq. They do not listen to logic, if they did, they would not have scrapped the 10p tax rate. They do not heed the results of surveys, polls, or Have Your Says.
In this crisis they will do what they have always done from the very beginning, which is put themselves and their sponsors first in everything; normal people are not a consideration.
We do not count. We do not matter. Even our votes are of no concern. Party A or Party B are indistinguishable. Our taxes and our grudging compliance is all they require.
There is only one thing that will turn their heads.
And it ain?t roses.
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Northern Rock are 'aggresively' reposessing properties as no other, saying it is an action of last resort. Lending at 125% , and x5 joint salaries weren't exactly going to lead to secure repayments now were they? Is this the 'fairer society' you speak of Mr Preston?
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#21
"remember the brain drain of the 1970s"
Don't make us laugh, unless we actually start making something again in the UK the brain drain will just carry on, remember the 1970s when we actually made things, designed things, exported things - there has been more of a brain drain since May 1979 than at any time before (true the brains might still live in the UK but they do no work in / for the UK.
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We have always had super rich and desperately poor. We have also always had bad times - I remember between 1937 and 1950 which was the longest period of depression in my life time, measured by having just a ration book and what the State said you could have. This is just a blip which will soon be forgotten. There will be a new set of people we can envy, except that just like the old class rich the oligarchs will have one thing missing from their lives. However much they have they will never be as happy as I am. Incidentally, when Brown talks about child poverty, and it still exists eleven years after he became responsible for ending it, he ought to take off his Superman cloak and ask whoever is up there for forgiveness. PS I am still on the hunt for the guilty parties who stole my Lloyds TSB savings
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Evil Poor. Ha ha, you're a bit like the Aga Saga woman off the Catherine Tate show.
You should be more concerned about the evil rich. They do far more damage.
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I can not help but feel that the net result of the current crisis is that the poor of the world will suffer most and for longest - we have just not seen the full effects of the chaos created work through yet. The rich may see their wealth reduce by several magnitudes, it will be the poorest that die as the global recession bites deeper over the next few years. Our leaders seem to be rather too busy congratulating themselves on avoiding the immediate threats to the lifestyle of the proviledged to contemplate the future disaster they have unleashed on the powerless.
Hindsight may be a wonderful thing but when we view this period with the benefit of it I fear we will have much to be ashamed of.
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Mr philanthropist Peston
Having been in both worlds of having all and having nothing, I can tell you that life is so much better having to ride a bike rather than pedal my soul!
If the super rich realised how full their lives would be without anything other than the basics that they REALLY need by giving away their surplus together with the super poor giving up benefits taking one of the 600000 jobs currently available and give up their meagre taxes to REALLY help the needy, what a wonderful place this would be.
The coming world Depression is going to be a great leveller where wealth will have to be redistributed and the real support will go to the those REALLY unable to produce something tangible from their heads or their hands or any other part of their body that somebody, somewhere can make use of.........so even Darling can benefit out of it
Its like changing the line in Animal Farm to " Pigs are not equal, they never were, but the farm will support all equally by means of either support or penalty"
That is the Panacea, all we need to do is mend the parts at each end and stop the competition to emulate at each pole.
Easy Peasy
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Interesting that you seem to think there was an escalating divergence in wealth during the last five years, which seems to suggest there had been some change in the way the economy was being handled.
Couldn't possibly have been an incumbant government seeking re-election not applying sufficient financial restraint?
By the way,isn't it possible that those lucky pensioners will have already spent their fabulous windfall? How much is 5% of the state pension?
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Downing Street Rob is a good name indeed.
Maybe the shareholders of LloydsTSB and possibly HBOS too should be suing you or your source for damaging stories released for maximum downside effect to the markets and maximum upside to your ego.
Relative wealth versus an absolute standard of living is not mentioned by you in this article and should be part of the discussion.
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55. gastank-1970
Your Times story was dated June last year. Have you got any updates, because I'd be interested to see if there were many actual prosecutions. And if the investigations are still continuing.
Taxing the super rich is simply something the government haven't got the stomach for. Too many friends and sponsors in hedge funds dissuading them I expect.
Besides, these super rich types are quite sensitive and huffy.
When someone yells tax at them they simply throw a hissy fit and relocate to the nearest tax haven.
I guess they'd rather do that than contribute their fair share to society like the rest of us.
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Under Capitalism Man exploits Man
Under Socialism the reverse is true.
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#48
re the 1980s
Trying to re write history again, there seems to be a lot of Tory supporters doing that of late.
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Sorry Robert, but I believe you are well wide of the mark here.
Setting aside benefit scroungers, the hard working people in the real economy are being absolutely ruined by the crunch.
The bankers who have been milking the system for the last 15 years already have far more than they would ever need to live in comfort for the rest of their lives, whether or not this years' bonus is reduced.
It's not only the bankers - senior public servants and MP's also have their snouts in the trough, and their gold-plated pensions represent a massive future cost to the rest of us.
I honestly believe we have sown the 'grapes of wrath' in this country, When millions start losing their homes and jobs they will take matters into their own hands and it won't be pretty. The Government will need all those new 'anti-terrorist' measures to try to keep them down. We all know that's what the laws were enacted for in the first place, not for catching some half-wit in a loo in Exeter.
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#53
If you think that you should try reading Nick Robinson's blog - but then again you were probably in the Young Conservatives with him!
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#54
Dog eat dog is not fair either, especially if one dog is tethered - as many of the 'poor' are.
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maroon 3 do they?
http://www.ukpublicspending.co.uk/uk_welfare_spending_40.html#ukgs30280
Annual cost of crime in UK Ģ60bn
Welfare spending social exclusion 17.1bn Central Govt
Social Protection Local Govt Ģ41.2bn
Ģ118.3bn per year total cost
According to Robert Peston Ģ600bn committed by Government to credit crunch. So just over 5 years cost on these areas. Yet Evil Rich do more damage. Over what period and on what figures to you substantiate your argument?
Ah Catherine Tate! Do you like Big Brother as well? Jeremy Kyle?
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Don't rest on your laurels Robert, OPEC have brought foward their meeting so expect oil to spiral again.
I am stocking up with heating oil at todays prices. Expect inflation to stay at higher levels than expected after OPEC.
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the utopian dream of every one being equal and wanting for nothing is just that a dream, sadly reality is as far removed from the dream as the chances for a cure for the common cold.
the chances of a utopean world failed from the onset as soon as anyone thinks themselves better than the next person.
so i find it funny when papers and magazines harp on about how the gap is closing becouse for the gap to close there would have had to been a massive shift in human behaviour, and from what i observe the truth is the opposit of what they say.
i hope the human race can grow up before it drowns in its own stupidity and lifestyle of overindulgence, greed and uncaring.
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65. maroon3
"When someone yells tax at them they simply throw a hissy fit and relocate to the nearest tax haven. "
Of all the failings of the 70's, taxing the super rich to 80% was the very penalty we need together with ensuring the sub poor didnt sit on their backsides and claim from the middle ground equality biased 'society'.
It was the latter that brought this country to its knees not Mr Millionaire relocating to Switzerland.
The sub poor lost their local communities and their UN-cherished amenities, whether by sea or canal, by lake or forest and have been 'taken' and cherished by the wealthy.
The landscape has not changed its been cleaned up, but scarred in many places.
Replacing the supermarket trolleys in the canals by refurbishing the canal side factories into luxury flats is not that much a difference. One pole unaware of the beauty that surrounds them, the other building their edifices to compliment their material led lives. One contaminates the water, the other contaminates the landscape.
The "awe" of the Brookside housing estates has been replaced by love of the simple cottage- the poor strive to move into redbrick conformity - the rich put their spare cash down on fishermans cottages (as second homes- or actually weekend hotels).
BRING BACK EQUILIBRIUM TAXES and you will see a reversal of those that have having more than they need and those that need have the ability to get that they deserve.
The ones that decide to leave for their "tax haven" will not be missed as they all have their tax havens already.
Easy Peasy
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maroon 3 apologies for the comments at bottom of my previous posting I got a little carried away!
Following link is up to date. HMRC are going after everybody who did not own up during the amnesty period when pay back of the tax owed without prosecution was possible. This followed on from the German authorities who paid bribes for customer lists from bank employees in Switzerland and Liechtenstein. I think HMRC customs threatened Banks in the UK with offshore businesses in order to get them to cough up the details.
http://www.telegraph.co.uk/finance/personalfinance/3143433/Four-celebrities-in-tax-cheat-probe.html
registered
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A fairer society?
You must be having us on, as many of the preceding blogistas seem to believe. Has someone slipped you something in your carrot juice?
Fairness is in our society reserved as a concern for religion. There is no égalité in our constitution - indeed there is no constitution. I remind you that The Levellers were put down long ago in about 1650 (I think). Are you asking for another British Commonwealth, who do you see as filling the role of Oliver Cromwell?
Fairness is not a very British concern (much as the morally upright bloggers might wish it to be). Capitalism is not fair. Life is not fair.
Viva La Revolucion! - Liberté, égalité, fraternité as the French chanted in the streets of Paris in 1789 - A bas la égalité! C'est un fantôme! (A film that Luis Buņuel did not make in 1974! - It is a wonderful film in my opinion!)
In the late 30's many idealistic British men and women went to fight and die for the International Brigade against Franco's fascist forces, that was fighting for fairness, but a little economic disruption for the wealthy and you think the World will end in 2008 ! It will not, and nor will fairness be increased or reduced.
Fairness strikes terror into the bourgeoisie it is what they most fear and most resist. It so frightens the anti-Europeans that because of Article 8 of the Lisbon Treaty they will oppose it absolutely. Article 8: In all its activities, the (European) Union shall observe the principle of the equality of its citizens, who shall receive equal attention from its institutions, bodies, offices and agencies etc.
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Ah, that famous Peston black humor rears its head again!
You would have been superb blogging on the Black Death epidemics those centuries ago!
Seriously, congrats on a superb job explaining a most difficult situation.
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66. At 9:57pm on 17 Oct 2008, hitthebid wrote:
Under Capitalism Man exploits Man
Under Socialism the reverse is true.
Wrong:
Under Capitalism individuals exploit EVERYTHING they are able to
Under Socialism individuals exploit EVERYTHING they are able to
Under Share-ism excess is force ably redeemed, Moderation is force ably excelled and the share-ists support both
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A fairer society? Successive UK governments have presided over a tax system that allows the super rich to pay less tax than the average check out girl, and a financial regulatory system that allowed the banks to engage in reckless risk taking whilst manipulating their own credit ratings and regulatory capital requirements - the FSA is hopeless, as is the regulation of the mortgage market.
Yet the system forces pointless and mind numbing regulation on us for the pettiest of transactions. Today I went to my bank to withdraw cash to buy veg in the market. I needed a Ģ20 note changed into Ģ10 notes so I could pay a stallholder who didn't have change. Clutching my cashpoint receipt I asked the cashier to change my Ģ20 note - the one that just come out of its cashpoint. I was told that in order to do that they would have to put the Ģ20 back into my account, and then make a counter withdrawal for the 2 Ģ10 notes!!
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#72
re OPEC reducing production, thus causing another price-hike.
I suspect that OPEC will be speeding their own demise, the 'west' are already accepting that they need to reduce their oil consumption (even in the USA, relatively speaking), if recession/depression comes then not only will there be less need for oil but many countries could well use Roosevelt type public works to speed Eco projects along or infrastructure works that will lessen the need for oil when the country comes out of the down-turn. Also there are non OPEC oil producing states that have geo-political positions were they would be prepared to supply their oil for far less to their 'political friends'.
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Still they have cash, they will use it to by poor peoples assets at a bargain; so when this settled they will be even richer.
Saddest part is we pay tax and they don't; there isn't much point in keeping them in this country as their business are else ware. The once that has business in UK live in another country as tax exile.
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Just watched Newsnight, Peston was right, he must get it straight from Alastair Darling, the Government is going to go on a spend, spend, spend spree on schools and hospitals (as though that is the sort of spending this country needs). There might be some argument for spending on infrastructure such as a high speed rail line, but not more spending of the sort favoured by Brown just to save his political skin. The strategy is this - massive spending announced in the autumn statement to counter the "global" recession - then "isn't the Government doing its bit for ordinary people?". Needless to say, this strategy is unsustainable, since given our Government's indebtedness it is a scorched earth policy which would leave the country in a basket case mess - but Brown doesn't care about that, all he wants to do is win an election next Spring - then he can have his place in history and another 5 years to complete wrecking the country.
If you don't believe me, get a copy of Saturday's Financial Times.
This is stupid, wrong and bad
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Robert, I think you are missing the fundamentals of the stock markets.
Buy low and sell high.
I think last year it was already recorded that the super rich were leaving the UK and heading to far flung destinations to await the bottom.
Then you'll see them come sailing back and buy up what's left at rock bottom prices, ready for the next round.
Let's take Phillip Green and his tax free dividend of 1.2 billion or so some years ago. The pound has dropped since then against the Euro. The guy has already made 20% profts without lifting a finger.
Now if that is with my knowledge I'm guessing this guy is making a mint on loaning that money out.
Sorry mate but if you have money you can't help but make money.
All the government have done is ensure anyone who was clawing their way up out of the pit has been either dragged right back down (Any surprises there ?) or has had a serious set back.
BTW I know a guy who sold up his properties last year and moved to Switzerland. He's made money on selling at the peak and money on the exchange rate. People like me can't even begin to compete.
Why even begin to theorise that the super rich are even exposed in the market atm ? The only ones seriously exposed will be the pension funds who have no choice but to have shares.
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Getting interns to write for you now?
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It seems reasonable that those on benefits should see a bigger increase in income. In fact based on the gearing that means that those on low incomes spend more of their income on food and fuel, 6% will probably mean a significant real-terms reduction in disposable income.
The inflation rate is closely related to the cost of what you're buying. If you're spending Ģ10 then you're probably buying food and inflation is about 15%.
If you're spending Ģ1,000 then you're probably buying white goods and inflation is zero.
If you're spending Ģ100,000 then you're probably buying a house and inflation is about -15%.
Even in the bad times, the poor get poorer faster than the rich get less rich.
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#55 The answer to your question is yes. Plenty of times, and I do know how feral some of their lives are. But I'm also aware that they weren't born feral and that how they behave now has reasons behind it and not excuses. Though they use plenty of them.
You've actually made my point for me. The benefit cheats in your local pub, although still cheating, will spend their money and pay V.A.T. Not entirely fair, but more so than the Billionaire who pays no tax and pays no V.A.T., spends a relatively miniscule amount here, and uses wealth to accumulate further wealth which means transfers from the less wealthy at an unfair price or at a cost of their greater indebtedness.
There are many aspects of the working class now that are uninspiring to say the least; but why are they always hammered while hedge funds are fawned upon? They are cheats too. A millionaire once said to me, 'I'm not ashamed to say it: I use tax loopholes to avoid paying tax.' So there you go - no shame.
While I'm on a roll: can we scotch the myth of economic growth? There's no such thing. There's money supply expansion and there's wealth transfer from poor to rich - but economic growth, as presented in the media, doesn't exist .
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71., gastank-1970
You have to ask yourself, who actually has the power in the country? You can blame the poor if you want for society?s ills. You can blame dole scroungers all you want. But it?s a cop out I?m afraid.
You are blaming the symptoms, rather than the cause.
Do the dole scroungers decide education policy or set education standards? Do benefit claimants dictate governmental or economic policy? Do they have any influence over immigration or tax rates? Do they set the laws? Do they own or control media organizations? Do they decide inflation targets or set interest rates? Did people on council estates decide to illegally invade another sovereign nation causing the deaths of x number of civilians and y number of combatants? Did the poor create Credit Default Swaps or off balance sheet vehicles to get around reserve ratios and inflate the money supply in secret, or create a derivative time bomb so big we can barely comprehend it?
No. The government, their rich sponsors and the financial elite did all that.
You might argue that in a democracy we all have our part to play. But the UK barely functions as a democracy since the majority of government manifesto pledges disappear like smoke the morning after ballot day, and the ideological space between the parties is wafer thin.
The working class used to have a party that represented its interests in parliament.
They called it the Labour Party.
That party hasn?t existed since the NHS was formed after the Second World War.
The current version is a deception and a fraud.
You can use the poor as scapegoats for all life?s problems if you wish. Let them be society?s whipping boy if it makes you feel more comfortable. But make no mistake, the power lies where it always has. At the top. With the rich elite.
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#82
"This is stupid, wrong and bad"
Why, because a 'few' will have to pay more tax at sometime in the future or that you don't believe that NHS hospitals and state schools should be fit for purpose?...
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Banks are de-leveraging and hence expect the stock markets to continue to go down. Any short term boom will continue selling until banks stop de-leveraging is my guess.
See bloomberg:
"Armageddon' Prices Fail to Lure Buyers Amid Selling"
While central banks injected $3 trillion into the global economy, credit markets are tumbling because banks are clamping down on lending, forcing investors to unload assets they bought with borrowed money. The Federal Reserve said Aug. 11 that its quarterly survey shows most ``domestic institutions reported having tightened their lending standards and terms.''
``There has been widespread liquidation of assets that has nothing to do with fundamentals,'' said Scott D'Orsi, a partner at Boston-based Feingold O'Keeffe Capital, a hedge fund which has $1.3 billion in assets. ``Investors in bank debt are being presented with a vast number of extraordinary opportunities; opportunities that I would characterize as once in a lifetime.''
The selling is being compounded by hedge funds and mutual funds dumping holdings to meet redemptions, which may push prices even lower, according to analysts at UBS AG.
...
It then goes on about some Barclays stuff that is not confirmed yet. Interesting article, also read something showing how UBS is de-leveraging at a huge pace yesterday - but can't remember where this is now 8(.
I guess this once in a lifetime stuff means the rich just get richer. BTW it says that:
"Because bank debt holders typically recover about 70 cents on the dollar in bankruptcy, almost every loan in the market would need to default before investors would lose money, LCD said."
...
Wall Street firms have curbed lending after taking $661 billion of credit losses and writedowns since the beginning of last year, according to data compiled by Bloomberg. The collapse last month of Lehman Brothers Holdings Inc., the fourth-largest securities firm, sparked a new round of selling as investors became concerned that more banks may fail, curbing lending even more.
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I can't believe that a year ago I bought your book Robert.
You really should be sacked for writing this contemptible rubbish.
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Re 55 - Man, what is your problem? Who are the evil poor and in what way are they different from the evil rich?
Why pick on poor people? Why not take a look at some of the mega rich and see how they live their lives.
What harm do poor people do to you? The answer is not very much compared to what they could do if they go fed up with people like you sneering at them and villifying them at every turn.
So they try and stay alive? What do expect them to do, sit in the gutter and starve?
How may benefit cheats will it take to equal the amount of money that people like Dick Fuld have taken out of the system?
Easy stuff to have a go at poor people who offend your sensibilities - why not look up the life and times of Mr. Usmanov? You try offending him and you'll find yourself in a world of trouble - that's why the BBC can find nothing more interesting to say about him than his relationship with a football club.
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more oomph into the economy? how long is Keynesiasm going to dominate the BBC? Granted it's state financed so it's to be expected I guess, but I'm getting sick of the stupidity of the BBC. Why not fill up a bath by taking water from one end of a bath and pouring it into the other side? "further increase in public sector borrowing. But many economists would see that as a good thing" are these the same economists who didn't see this crises coming? yea, thought so.
The entire premise of the article is pure nonsense, a shrinking of the gap shows that "So what we're seeing is something of an uplift for those who are poorest" is this even a thought out statement? The idea that everyone is worse off and that a narrowing is just a result of that not occur to you? the porrest aren't better off if the richest are worse of. Economics isn't a zero sum game of, the worse my neighbour is the better I am.
Anyone reading this use your brain when reading this kind of garbage. Also don't buy their ignorant explanations of why this crises is happening. This crises is happening because central banks manipulated interest rates and kept them too low causing people to borrow too much and make bad investments. Now that it's clear we have inflated our economy with manipulated interest rates the bubble is bursting and governments are pointing the finger at free markets and saying you need to give us more power to control this thing. Don't be a complient sheep, look for the source of the problem, it IS goverment, mainly in the US but in the UK and elsewhere too. Now they're using this to scare everyone into paying through massive government debt and government created inflation and to legitimise an international central banking system where central banks will have massive control over the global financial system.
Try reading beyond the single explanation and single solution media that dominates and manipulates everything you see and hear. If you have any fondness for your own liberty and prosperity try educating yourself and reading something like this
http://blog.mises.org/blog/
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This comment was removed because the moderators found it broke the House Rules.
"fair" - what is the definition being used?? Is it fair that those who produce are punished by way of governments by having portions of their earnings expropriated and that money distributed to those who do not produce? And the more someone produces the more s/he is taxed (greater percentage)? And governments by way of their various welfare benefit programs encourage many to collect handouts (benefits) rather than to change work type (retrain themselves if necessary) or look for temporary employment in a different field while continuing to search in their primary work field or location.
"national cake" - ?? Is this supposed to mean that the the productivity output of individuals belongs to the government who, like some supposedly wise parent, distributes it directly to the non-productive or creates any number of different type of projects that a private company would do if the owner(s) thought that gain could be had by offering the product/service. Government getting into the marketplace in an area will always discourage some (often many, even all) business enterprises being created - it's pretty difficult to compete with an entity that has a virtually endless source of money, the taxpayer.
And a free market does not exist anywhere in the industrialized world - all are interfered with by the resident government, mostly quite heavily. In fact those countries with the most heavily interfered marketplaces are well on their way to fascism. The UK and the US are in the forefront of these....
Governments (the people in it elected, appointed or simply hired) have the mindset of making and keeping the vast majority of the citizenry dependent, ignorant and fearful. And maintaining ignorance regarding economics is one of the primary needs of government, else everyone would realize that all governments do NOT make money - they can only expropriate it. Governments cannot create credit - this can only come from savings of people who produce, and governments by their interference in the marketplace definitely discourage this. Current "credit loosening" by governments is a farce - it is another round of currency printing with the inevitable increases in prices that this currency inflation brings. But most people do not know enough about real economics to see that the emperor is wearing no clothes, and I'm sad to see that you and most other economic journalists (along with the recent Nobel Prize economics winner, Paul Krugman) do not recognize this either.
In regards to your PS, Robert, it does not sound like you are familiar with the broken window fallacy - the idea that replacing broken windows adds to the productivity in the world. If one does some reasoned thinking, s/he will conclude that the resources not having to be spent replacing windows that some hooligan (or even a storm) broke can be spent by the owner of the residence/business on some item to actually increase hir lifetime happiness, not simply restore it to what it was before the window was broken.
Kitty Antonik Wakfer
Casa Grande AZ USA
PS - #92's suggestion re. mises. org is a good one. I'd suggest their daily article. A very recent one by economist Frank Shostak on credit was exceptionally informative - http://mises.org/story/3151
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It seems to me that the current circumstances we all find ourselves in is proof that privatization or outsourcing works. American private capitalism has accomplished what American domestic, foreign, and militiary policy couldn't, it has managed to bankrupt the entire world simultaneously. Most impressive is how its major competitors grabbed the poison bait not merely wililngly but eagerly. Friend and foe alike, those America does business directly with and those it doesn't do business with at all will all find themselves in the same boat, sinking and drowning together. And when the dust finally settles, who will be on top? Does anyone think they planned it that way is that giving them too much credit? :-)
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This article sounds like one straight from the manifesto if the Socialist Workers Party !! This is exactly the kind of thinking that drove the rich from Britain in the 70s, leading to a collapse of the economy and the then Chancellor Dennis Healey going cap-in-hand to the IMF to borrow 6 billion quid !!
If this happens and there isn't a strong pro-economy, anti-waste government in power, then, based on the experience of the 70s, Britain will be in for at least 10 years of suffering. The worst case scenario is that Britain will become a Third World country that rival the Eastern European states !!
With virtually no real industries and no hope of new investments because of punitive government taxes and an anti-rich government stance, Britain will never work its way out of the economic mire.
Make-work industries will only sink the country further into the smelly stuff and the products they produce will be the new laughing stock of the works alongside the Trabants, Ladas and other late Soviet manufacturing wonders !!
Food rationing will be imposed because much food have to be imported and there will be little or no hard cash to pay for the imported food.
One bit of "good" news will be that the unofficial population of Britain will drastically reduce as the illegal immigrants flee in droves to where making a living is much easier.
Then everyone will be equally poor except for the corrupt Party members and the Union of Soviet Socialist Britain will become a reality, complete with the local equivalent of the KGB and gulags in the remote Scottish isles !! And their first valued customers will be the separatists and "terrorists" who wish to "destroy this Great Socialist Homeland" !!
Hooray for a Great Leap Forward into the Past !!
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Further to my recent comments concerning the FSA recruiting bankers, we now discover, despite what has been said, that they have watered down the Prime Ministers' instruction that bankers are not to get bonuses into something which doesn't even form a formal guidance - ie please ignore - and are allowing them to take equity instead. Under these circumstances, that's regulator-approved theft. As I've said before, and doubtless will say again, the
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Sorry, Mr Moderator, please tack on tp the preceding:
We must fire the FSA lock, stock and barrel.
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One thing about the differences between rich and poor in earlier blogs is that in one respect we are all equal. We all have just one vote come the General Election. The signs suggest to me that He who would be King may be clearing the decks to have an early election, perhaps in weeks.
Each day a new announcement comes that would give credence to such a proposition, in addition to the dramatic change in fortunes in opinion polls (Cameron and Osborne have suffered as Brown's popularity has risen). SATS for 14 year olds have been abolished, government pressure is being put on utilities to drop prices, and today we have an announcement on immigration - a subject that is normally off limits to all parties save the BNP.
The only hope for those of us who think that He would be King should pay for his eleven years of carnage to pensions, savings, stealth taxes, debt, child poverty etc is that 60 million people will wake up from three weeks of amnesia and send him to the same insititution, with secure exits, in which the Board of Lloyds TSB should be incarcerated.
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For those of us on pensions or benefits the anticipated increases come because we have lost out through inflation in the last year (usually by more than the official rate if we are at the lowest end of the income ladder) ie we are worse off than we were a year ago. Seems a funny interpretation to say we are in a fairer society as a result. I shall look forward to waving to the mega-rich as they pass my upward moving escalator on their way down.
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#88, isn't this the sort of spending that got us into this problem in the first place? I guess it's a case of "if at first you don't succeed, try, try, try again"....
Where exactly is this money going to come from? Taxes? On what? On who? "The super-rich"? They'll up and leave. It will come from increased borrowing and inflation - just like the last 8 years of Brown's "miracle" economy and maybe he'll be able to keep the Ponzi scheme going for another 2 years and then he's safe for another 5. I mean who cares whether the country goes down the toilet?
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"A Fairer Society" - Discuss.
Great "A" Level question on the Sociology paper for this year. But I bet the essays will read a little different to Roberts'.
If you are going to recover from an addiction you have to acknowledge the problem. There seems little acknowledgment from anyone at any practical level that credit is an addiction. The papers are full of car adverts with easy credit tag lines, The white good sales are similar. The credit cards are promoting their business at full steam ahead.
So the finance business still seem to be trying to sell credit. Not to business or house buyers ( because they have maxxed on them). No, they are moving to the next target Oh, and if their is a bit of collateral (sic) damage on the way does it matter?
So no, not really a fairer society. If you are on the lower or middle rungs of the ladder you are still stuffed with debt repayment and now probably unemployment but if you are balancing on the top of the ladder you can swing over to another ladder without dropping too far.
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Er, Mr Preston, exactly what stats you been looking at? The State has been growing exponentially since 2000 - which is when Brown started his big spending spree...
Exactly what "economists" have been suggesting that increased government spending to fund increased benefits is somehow going to "help" the economy? If I borrow from you and then buy something from you with that money have I created any wealth? All I have done is move money around and in the real world lost a large portion of it twixt cup and lip. May I suggest these "economists" go back to primary school and start their education from scratch?( I'll also bet money these "economists" are Treasury with maybe a sprinkling of lefties from universities ).
The gap between rich and poor shrinks in a recession because most of the "rich"'s wealth is notional and in investments of houses, commodities or stocks - all of which go down in a recession - and the poor tend to be cash-driven. Hardly rocket science.
What we have now is the inevitable result of the Keynesian policies of our idiot chancellor - now PM - stagflation. Having knifed pensions over and over - by removing ACT, by insisting that solvency be measured against the 50 year bond and then cynically issuing lots of 50 year bonds - he is determined that what little you have left is destroyed in hyperinflation. Maybe he could get Mugabe or the Weimar to come in and advise him?
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@2 Absolutely spot on!
This article is very accurate
I worked for a large corporation. Since 2003 I did not get a single pay rise or any bonuses. At the same time the new CEO got rid of the old prudent boardroom & corporate pay structures to "compete" with market rates. The CEOs pay package ballooned from rounghly 40x my salary to over 200x my salary plus share options.
I was told to work harder and "keep up" with the competition if I wanted to remain in a job. My unpaid hours got up from the odd hour to a regular 10 hours extra a week for nothing. I decided to jump before I was pushed in 2007.
The sad fact of this matter is that I would have been more than happy with a modest pay rise and a nominal bonus every year. I am sure this would only take a fraction of the CEOs pay if spread across the whole company.
As this is one of the largest companies in the world I do not believe capitalism in its present form can survive as Greed seems to be the overriding motivation of those so-called captains of industry.
Take the banking system. Its astonishing that the bankers would go to such extremes to "kill the golden goose". There is no obvious long term strategy. Why hasn't a single banker cheif appeared before the media? Surely with their earnings they are more than accountable which begs the question - : Are we living in a Liberal Democracy or a Fascist Kleptocracy? How come Gordon Brown's bailout package wasnt passed through parliament ?
Thanks to the fat cats the American Dream is officially dead
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#92
Anyone who thinks that there is only one way to skin a rabbit is either easily lead, a fool or both - Friedmanism (Thatcherism by it's true name) is not the only way, indeed many successful countries have never implemented much in the way of Friedmanism...
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A fairer society, you say?
Oh yes, we'll see a fairer society alright.
Bling is dead.
Shortly you'll see every overpaid footballer, banker and fat-cat rich boss espousing the benefits of frugality. You'll see the rich queitly abandoning their palaces for 3-bed semis. Driving a flash car will be a liabilty - it will make you a target.
We are about to witness the greatest shift in the perception of wealth in our history.
Why?
Because the rich will become targets for the non-rich. And there's a lot more of us than there are of them.
If I were rich, I'd be very scared for my future - and personally I'm looking forward to a levelling of the playingfields.
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Thank you for your excellent service ,
informative and fascinating, it lights up the
murkiest corners of our financial system for the
tyro who thirsts to know more. It may well be that you are helping to establish a 'fairer
society' in the future. 'Ignorance is bliss but knowledge is power.
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#101
re referenced quotation in the above message
How about trying to get your attributions correct.
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OH HOW FUNNY!!!!
THATS THE NEW SYSTEM WE ARE GOING INTO ,TOTAL """INTER-DEPEN-DANCE"".
MAY I SUGGEST PEOPLE READ "AGENDA 21"
I REPEAT
AGENDA 21,
AGENDA 21,
ON THE U.N (THE ONE) WEBSITE, IT CLEARLY STATES,
NO PRIVATE PROPERTY
NO PRIVATE TRANSPORT
FOOD HANDOUTS
CREDITS FROM THE STATE (MONEY)
PEOPLE ARE TO MOVE INTO HABITAT AREAS
YES THIS IS WHAT WE ARE GOING THROUGH NOW...P.S..DONT FORGET THE NORTH AMERICAN UNION...CANADA ..USA AND MEXICO UNITED TOGETHER WITH A NEW CURRENCY THE AMERO IN LESS THAN 3 YEARS!!!!!!!
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#82
"This is stupid, wrong and bad"
Why, because a 'few' will have to pay more tax at sometime in the future or that you don't believe that NHS hospitals and state schools should be fit for purpose?...
Why?
1. Because this Government has a woeful record of spending our money wisely.
2. Because if we are going to have massive borrowing and pump priming, it should be used for infrastructure to increase the long term capacity of the economy (road & rail for instance) not for welfare.
3. Because it is the masses who will pay in the future, not the "few" as you put it.
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#110
One problem in you rant, these 'works' are just bringing forward work that was already planed, they were going to happen anyway - who knows what else is planed.
As for "this Government has a woeful record of spending our money wisely.", to true, they never take from the poor and give to the rich as Thatcher used to....
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#104
"Take the banking system. Its astonishing that the bankers would go to such extremes to "kill the golden goose"
It isn't astonishing at all really and the reason they are doing it is explicit in the earlier part of your post:
"The CEOs pay package ballooned from rounghly 40x my salary to over 200x my salary plus share options."
They can earn 'sufficient' in one year to keep themselves in a life of absolute luxury for the remainder of their lives.
This no basis for society to function - even one based on capitalist principles. I would describe myself as a 'moderately right wing, supporting free market capitalism', but capitalism has got out of hand and is on the point of destroying the fabric of Western society. 'Free Capitalism' has been replaced by 'Greed' and there is a big difference.
At this point it is the absolute responsibility of governments to step in and protect society - but not by pumping limitless money into the banking system without first ensuring that the wealth of that system is redistributed for the good of society as a whole and removing its destructive elements of greed and unchecked exploitation of the weak.
I think Robert has a mission, possibly even religious - the establishment of a New Order: moral and socially-responsible capitalism - and we should support him whole-heartedly in that!
Go for it, Robert!
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#67, hmm... pot, kettle anyone?
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My heart bleeds for them.
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The problem with economists is the blinkered way they reduce and value the world of man to define ultimate reality.
The problem with where we are is that freemrket dialectics banishes and condemns any way except it's own measure to portray , measure and map the politcal, social and collective junction of the world.
The quotidean is enslaved to your idol and silenced. Condemned as the ultimate enemy if it seeks to speek in more complex non freemarket references. And so with you and your blog. The way you frame society is so distorting, in fact the newpsapers are today full of very distorted measures about where society currently is.
What's happening now has to give way to the re-emergence of the process of repositioning politcal ideology and that aught to become the defining rhetoric of post CC.
But this is essentially not the discourse of economists in the first instance nor freemarket politcs which only sees markets. Yet social-politcal ideology has it's own tradition, with it's own history forced into a prolonged sleep in recent decades.
We now live in an age of terrible distortion. The great danger is how the power of the superwealthy manifests -if they become old and mad and bad as they assume immortality or if they kind a' evaporate a little and society suddenly gets alright again which is the current way economists measure stability regained.
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#14
You may be right on Cameron and Osbourne, but the same's true of Brown's lot too. If you want to see something uncanny, take a look at the correlation between Robert's blog postings pre-Lloyds TSB/HBOS announcements and the respective movement in the share prices...the timing of the blogs and the movement of the prices is blindingly obvious. "Government sources" are using the blog to sort out their policy decisions and testing reaction to their planned announcements through this blog before they make them!
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Boiler plated, OK so lets tick some items off:
1) Can't get basic dates right, thinks Thatcher resigned in 1991.
2) No command of basic maths, thinks the boom and bust in house prices was the same under Thatcher as a Brown - wrong by several orders of magnitude
3) No idea what Thatcher actually did to cause this - just it is "obvious", but not "obvious" enough to be able to back up with any actual claims
4) No command of basic economics - thinks massive debt-financed spending is "Monetarism".
5) No command of international history. thinks Chile under Pinochet - 3,000 dead in a decade - is equivalent to USSR under Stalin, China under Mao, DPRK under the Kims, Cambodia under Khemer Rouge, Vietnam under the communists, Ethopia under Mengustu, Cuba under Castro.
6) No command of pyschology, thinks we were somehow "forced" to buy overpriced houses as some sort of delayed post-traumatic stress reaction to the indoctrination under Thatcher some 12-17 years after she left.
and always posting with the same smugness that befits someone who appears to know absolutely zero - apart from to chant slogans.
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#101 Laughingblacksheep
There seems to be a lot of discusion of blame about. My view is that everyone is to blame to a greater or lesser extent and that all economic means of control have failed and will fail because they are too simplistic. I detest all governments and would say thay my position is sort of soft left with a bit of jackboot.
I think some of your analyses have been spot on and would like to know what you think we should do from this point forwards.
Cheers,
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#110, the government has spent massively on infrastructure such as the railways. Just got next to nothing to show for it.
PS love the way when you point out any facts that don't match Mr Boilerplated's views they become "rants" as opposed to the hard factual approach he takes. I blame Thatcher....
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#113
You offering your pot and kettle? You're the person who tries to ignore the fact that Thatcher was the British PM in the 1980s and was the person who put the current fiscal system in place...
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This comment was removed because the moderators found it broke the House Rules.
#112, no it isn't the government's responsibility to look after people who overborrowed and overspent.
We have had a massive bubble and now it is time to pay the piper. What will happen now is a deep recession, crash in asset values and probably a period of strong inflation. All Brown can't avoid the inevitable all he can possibly do is kick the can down the street and it is not obvious he will manage that.
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Some observations beyond the banking crisis that I hope you will find mildly relevant. I studied the effect of the 90s recession very closely:
1. There is no more real money in the UK economy than there was in the 90s.
2. The 'increased wealth' is paper money. More will be printed.
3. The media will quietly let the 'recession' story die, recessions are not dramatic news like share collapses, de facto 'it's here' so 'no point going on about it'.
4. The recession has probably been covertly welcomed by the Govt because it will lead to greater dependency on welfare. Brown is an expert at 'giving to the poor'
5. The repossession, foreclosure, insolvency, seizure juggernaut is well under way, cue Northern Rock.
6. We will not 'come out of this' as journalists eg: John Humphries (Today prog Sat 18th) like to remark. What happens during a recession is that wealth moves away from the affected countries - it does not come back. The shift after the 90s was to tax havens and investment in the Far East. That will continue apace.
7. Loss of expertise, technology, capacity will increase exponentially - many industries took 15 years or longer to recover from the last recession.
8. Diversity and choice of all things consumer will be drastically reduced as retail operations reduce their stockholdings and procure ever-cheaper options.
9. Customer service will get worse, the trading transaction of the future will not be 'money for goods' it will be the handing over of the money itself. In the main the goods will be worthless junk that looks like the real thing but will fall to bits the second time you use it and it will come from the Far East.
10. Import will increase, export will die and the balance of payments deficit will get appreciably worse very quickly
11. The NHS bill will expand rapidly to pay for the many people who become ill due to stress and worry.
12. Rental prices for those forced from their homes will go up dramatically as agents seize upon yet another new opportunity to recover their loss from the drop in house sales.
13. Crime will increase as the most desperate and daring in the lower levels of society decide to take what they cannot get by other means.
14. Our currency will become valueless around the world.
15. Utilities will increase their profits by raising their prices unchecked.
16. The most skilled and able will move away from the UK to where their skills are actually wanted.
17. The younger generation will cease to believe in the worth of the nation and act accordingly. The warning signs of the danger to cohesive society of ?feral?teenagers and gang culture have been around for over a decade.
18. Drug use, dealing and alcohol abuse and violence will increase.
19. Driving standards, indeed all interpersonal standards will slip ever lower.
20. More prison will be built???
These are some of the direct consequences of the last recession. It happened last time and some; I have no reason at all to suppose it will be different this time. The problem with the last recession was that the government under Major deferred the decision as to whether we were 'in one or not' that by the time they agreed it was too late and a ghastly kind of 'New Order' had enveloped the country. No thought was ever given to how it might be better dealt with in the future, then or now.
Of course, there are numerous measures that could be taken and in my view should be to restore the UK to trading nation status, living by the outstanding excellence of our UK produced products, slamming the door on imported food, 2nd rate goods of all kinds from retail items to cheap tools, and end to inward investment, a call to best brains to come home and rebuild the nation, separation from the EU, an end to currency trading, social and legal reform measures on the scale of the introduction of the Welfare State to protect ordinary citizens from the fallout, capping of interest on credit, freezing of repayments (a kind of moratorium) to give folk a breathing space.
And many other things. There are risks attaching some of those proposals but at least they are proposals presented in open forum for discussion and proposals you will not find at all on the mainstream party websites. There you will find pretty contemporary stuff that simply isn?t any use anymore. You will of course describe some to the things I have mentioned as impossible or 'barmy'. So be it, but I am not a politician so can't be held-to-account for being too, er bold or imaginative. You should, however, before doing that, ask yourself whether democratic process has some part to play now. It does:
'Have I written to MP and what is my MP doing for me?'
And:
'What imaginative and robust measures is the Govt now implementing to build the country we want to have?'
What kind of country do we want? Does anyone care what we want? One thing is for sure, history proves it, tomorrow will not be as yesterday was. Everyone wants something different from the next man excepting that we all have in common a desire to be slightly better off and not worse. But life gets harder doesn?t it? Why should that be? Do we employ not governments to make things better? Of course we do, that is the modest expectation of a democratic society. But whatever we do want, there are anyway no measures of any kind in place to create that thing. None at all.
Indeed, as the days drift into weeks and the socio-economic trainwreck gathers pace in what I am sure will prove to be the worst period of social upheaval since the 1st World War, this government will increasingly seek to divert attention from that issue by rolling out endless, worthless half-baked legislation and proposals that are neither pressing nor relevant at this time.
If as a people we do not pressure our Parliamentary representatives at this critical time we will have their dull, plodding 'vision for Britain' rubbed in our faces. And worse is yet to come. The bulk of realisable wealth (property, investments, pensions) is firmly in the hands of the generation 40+. The bucket is well and truly empty and cannot be filled by dreaming for one second that everything will be OK. And those in their twenties now and more especially those that come after will look back on these as ?the years of the generation who took everything? and left no worthwhile legacy at all.
Where are the like of the great reforming minds that dominated world politics in the middle of the last century? Where is our Parliament? Where are the demagogues? Are there none left that speak and do act decisively for the people?
GC
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#120, one last time. Thatcher and Major=monetarism, Brown=Keynesian.
Just look as debt growth under Brown. It is black and white.
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The most powerful human instinct is that of survival. We are all programmed to survive at all costs and at the expense of others if necessary. With such an inbuilt selfishness, human society needs strong social democratic governance to ensure that the extremes in our behaviour - particularly those associated with the generation and distribution of wealth - are dealt with in an equitable fashion and to the overall benefit of society.
This crisis is something we should actually all be thankful for. Why? Because it has revealed the true level of corporate and political corruption in our society.
So, what's wrong? In a world of accelerating change, our political system delivers glacial change. There has been a massive failure of corporate governance. In the financial sector transparency has been deliberately clouded by obfuscation and complication. Corporate intimidation has produced a lightly regulated environment where personal power and greed have been allowed free reign. Ethical behaviour and moral and social responsibility have been the casualties.
We have all, rather lazily, accepted a political system that delivers a diet of repetitive, meaningless political rhetoric and an endless stream of 'new policies' - most of which achieve little other than to create confusion, inefficiency and bureaucratic constipation. We are forced to watch our politicians squabble for weeks over their expenses while families across the country are living with the threat of having their homes repossessed. In cities across the land, families live in third world ghettos, ineffectual national and local politicians deaf to their plight. We should all be deeply ashamed.
If we are to have a fairer society we need political reform at both national and local level. Government needs to be able set the agenda, not be a part of it. It needs to be pro-active not re-active. We need to examine how our country is managed and by whom, and set new standards that can deliver what the people of this country should rightfully expect.
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#117
Try reading what I actually say rather than what you think and hope I say.
Anyway, do you want anymore nutty fruit-cake or are you already over full of it already...
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#110 "1. Because this Government has a woeful record of spending our money wisely. "
Usually, where the government has misspent, it is either a result of the private finance initiative (a Tory accounting fiddle Labour continued and extended); and/or over cosy relationships with private companies who have donated to the Labour Party, sponsored events at its conference etc. Tony Blair promised an end to sleaze: one year later we had the Formula 1 fiasco. I'm afraid it's been "plus įa change, plus c'est la męme chose."
We have had government by sleaze for a very very long time, and it's naive to think that Mr Cameron would change things. After all, shadow chancellor George Osborne's office has been funded by a hedge fund manager.
"Caesar's wife must be above suspicion!" There should be an outright ban on corporate donations to political parties or politicians, and a very strict cap on personal donations. I hate the idea of public funding for parties, but so long as it is in proportion to the number of paid-up individual members, it may be the least of evils?
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#118, Business cycles are a fundamental part of business. People underprice risk then overprice. As such volatility is part of doing business as Robert May once said about mathematical models in Biology - "reaching equilibrium means you are dead"... So some sort of market bubble and collapse is inevitable.
What the government's role is to ensure a level playing field and to ensure sound money and that is it. A competent government pricks the bubble early, pays the bills and so ensures the country can move on. We have two case-studies - Under the Tories where the inflation of late 80s and late 70s was burst, and under Brown where he is doing everything he can to reinflate it. It is a fundamental difference.
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#126, you want me to post links where you have claimed exactly that, word for word?
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I see that Thatchers 'children' are really bleating now, the black sheep must be really scared that their greed will do for them (in a flock of sheep any black sheep are worthless, other than a source of mutton), the tide has turned and they know it.
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re:87
The best thing I have read in ages. Education is the key to a 'fairer' society. But it does not serve capitalism to have everyone well educated as how 'man exploit man'?
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Anyway, here is the real victim's story from this credit crunch. Might not get through because there is a little bit of bad language.
http://www.youtube.com/watch?v=mjX6aKLy2N4
Of course, no **real** trader would have a GREEN AmEx....
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#129
More nutty fruit-cake sir...
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#130, I retired at 33 two years ago, sold all most stocks and homes hold money in government bonds. That's how I have time to waste with people who think deficit-spending is monetarism.
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#134, mean all, not "all most"....
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What grieves me more than anything else is the knowledge that whilst Labour MPs have become much richer, including those on the left, the poorest section of the population have fallen further behind over the past 11 years. State pensioners have fared worst of all. The promises made by New labour have been broken.
Cabinet ministers hobnobbing with billionaires, not least Tony Blair, make me sick to my stomach. Hypocrisy will be New Labour's epitaph as much as sleaze. Mandelson personifies all that is grubby in the political establishment. After the next election we will be lumbered with a bunch of Etonian Toffs, though my expectations of success from them are very low.
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We need a 'People's Parliament'
650 MPs - all independents, each representing their own constituency and making decisions for the good of the country, not for political advantage - and no monolithic political parties funded by big business.
This is the only way there is going to be real political reform and a 'New Democracy'.
The next election is the right time. Let's make it happen.
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134. laughingblacksheep
Retired at 33? Not something I'd be boasting about, if I was you. Especially when people are losing their jobs and are getting thrown out of their homes. Some people might take offence. Idleness is not a virtue.
Back in the real world. . .
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#136, the only positive that might **might** come out of this is that it will knock on the head all this tax and spend nonsense. Wouldn't hold my breath though.
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#138, it isn't a boast. Anyone with a brain could see the economy was lopsided and there was rampant asset inflation in housing. Anyone paying attention could see Brown was incompetent and a liar that chopped and changed stats to flatter his performance. As i posted earlier there were no end of articles and warnings about the economy over the last 3-5 years.
It would have been nicer if Brown had moved decisively in 2004 when it looked the BoE was going to hike rates to kill off the bubble, instead forced the BoE to follow his new inflation measure which meant the can got kicked down the road and now we are looking at an extremely deep recession. It would be nice if the country's finances were in better shape instead of massive deficit spending and so there would be more in the pot to cushion some of the blow.
Blaming the guy who decided not to get trashed the night before for your hangover isn't exactly the most responsible response. One can only hope that the silver lining is that people are little less reckless in the next bubble - but we all know they won't be.
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Robert, you know full well that the capitalist system will only ever have one outcome. The rich will always get richer and the poor will always get poorer. The super rich will soon recover any momentary losses they have made. You also know full well that ''boom'' and ''bust'' is built into the system. Capitalism isn't viable without it.
A Fairer society? Within a monetary system? Are you trying to insult our intelligence or does it come naturally?
Next you'll be telling us that the monetary system can ''make poverty history''.
I should imagine your incapable of conceiving a world without money, politics, law and religion. Try a resource based system rather than a monetary system thats the only way you'll create a fair society.
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#137, you are right in a sense.
One thing that angers me about this whole mess is the Parliamentary protocol whereby you cannot engage in discussion with an MP outside of your own constituency, whilst at the same time some seem to be able to get access to Govt Ministers quite readily. For example, if you have an idea that your local MP does not agree with it will not by default be forwarded for discussion at Party level, and you can't just write to say, David Cameron and expect to get a reply. I have tried this quite often.
There are many posts on the BBC website where well-off, successful members fight with (clearly) disadvantaged ones, whereas the citizens (nay, 'subjects') of the UK should really be uniting in the fight for proper democratic government and setting aside their previous distinctions of class, status, creed and politics. The people united at last, if you like, insofar as a people ever can unite in a common cause.
I think 'people power' has probably been exemplified in some former Soviet Bloc countries in recent years, it can be done and certainly it is the one thing British governments with their old chairs of wealth, patronage are really afraid of. I'm not talking revolution here merely a restoration of power to the people as Cromwell tried to do.
Continued attacks one side against the other? British government will simply exploit those old differences to the benefit of one group and the detriment of another in the same old way and nothing will get done that will benefit the nation as a whole.
GC
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#124 If only it were that simple. Thatcher was, at times, (i) a Friedmanite monetarist, (ii) a bizarre version of monetarist of her own devising, (iii) a rabid supply-sider. Major was, at times, almost neo-Keynesian and a slightly fuzzy monetarist. Blair and Brown have been anything but Keynesian in their approach - in fact there has been so little real economic stewardship in a period in which macroeconomic policy-making meant only interest policy (devolved, too, so it couldn't bear any relation to fiscal policy) that you could almost call it the 'era of government irresponsibility'. How Brown has the bare-faced cheek to claim his stewardship of the economy as a sign of competence is amazing: he all but abandoned that stewardship and disengaged fiscal and budgetary policy from economic management on the dodgy grounds that he had 'abolished boom and bust'. Fat hope of doing that, ever.
What is astonishing to those of us of a broadly liberal persuasion is that the 'K' word is now being used again in public places after an absence of nearlt two decades. Now, I know the story of how stagflation in the late seventies and early eighties, coupled with Thatcherism, discredited the Keynesian (or as we were wont to call it, neo-Keynesian) prescription. Moreover, I lived through it, albeit as a school boy and a student. But, as the old boy said, IF a full scale depression is staring you in the face and demand management is the answer - well, put aside inflation control for another time.
Actually what we are facing now is a classic depression in the making - rising unemployment, falling prices and asset values, destocking and low market sentiment. There has never been a better time since the 1930s to dust off a copy of the General Theory. I'll even buy one for Mr Darling if he's interested.
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A good aricle, Robert.
But I still feel there is a case for retrospective taxation of these people, and even seizure of assets.
They have walked all over us, and robbed us, and the government, blind.
They have pocketed vast sums under false-pretences, (the pretence that they know what they are doing, and are expected to safeguard the publics' savings and pensions).
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*123 +*125
Truly excellent comments.The elite are leading us around by the rings they`ve put in our noses.
There is only one way to break free and look after the interests of society,and that is to take back control of the money system out of the hands of the "international people"
Anything else will be playing "their" game.
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Please do not get me wrong, I do not think all poor people are evil, or indeed all rich people of evil.
I remember seeing a programme about a former mining community in Yorkshire. Funding was available for 3 recreation areas and the well meaning consultants/Council came in. One of the residents who in all honesty probably was not very well off demanded the play area be managed by the community, fenced off and locked up at night because she knew the area. This appalled the do gooders because it was "excluding people", but she got her way at one of the areas, the other two areas remained open 24/7. The results well work it out. Listen to the good working poor and what they want, as opposed to trying to apply your values, experiences and beliefs to the situation.
My point is that certain sections of British Society are allowed to do just as they wish and indeed encouraged by the system for example people with children go to the top of the housing lists (hence get pregnant to get a house).
As admitted in posts here some of the people know no better. Well with your own children do you set boundaries of acceptable behaviour with rewards and punishments (obviously not physical)?
If people have all the rights and no responsibilities they will do as they wish, because no incentive exists to stay drug free, value education or not commit crime, as the system will still provide regardless. It comes down to basing the system on need rather than deserve. This is price that society is currently prepared to pay.
As for the evil poor existing, ask the daughters of Gary Newlove about seeing their Father's head smashed to pieces in the street. He will not be their for weddings and to see his Grand Children grow up.
What about Sophie Lancaster kicked to death because she was a Goth. The defendants laughing and joking in Dock as they go down for life. What are they?
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In the likely event that Barack Obama wins the US Presidential election, his plan to "spread the wealth" as he explained to Joe the Plumber when asked why tax on the small business he wants to buy will go up bodes very ill for the US and world economy. Higher taxes are exactly the opposite of what is needed in a recession and could prolong it, deepen it, even turn it into a depression. But given the huge shortfalls in government revenues to the point where some of the states will need bail outs by the federal government or go broke, this is a real possibility. It's that or face loss of vital government services at the state and local level.
This weeks airing of "The Interview" hosted by Owen Bennet-Jones features Mark Gertler and is worth hearing.
http://www.bbc.co.uk/worldservice/programmes/the_interview.shtml
Gertler was a close associate of Bernanke and remains in touch with him periodically. What you get is an image of economists who viewed the world through rose colored glasses, ignoring the lessons of history and not merely going along with removing all of the regulations and restrictions which would prevent another great depression but advocating removing them and he even still defends some of it. And why? For the very reasons they were enacted in the 1930s in the first place, to prevent easy unregulated credit from realizing substantial short term profits at the expense of enormous long term risk to the very structure of the economy itself. "Oh what fools these mortals be." You will hear frank admissions from one of the world's most respected economists including the belief that the business cycle had ended and that no economists in power considered what would happen if there were a downturn in the housing market. Given the bubble nature of this wildly speculative market, how could economists have helped but consider such a possibility, no even a certainty? And that novel institutions which peformed the functions of a bank and created impossibly complex and opaque financial instruments were created and went unregulated. Talk about stupid. So the conclusion is that economists like the rest of us mere mortals are entirely irratonal and that there is no reason to believe that in 70 or 80 years time when the regulations that are about to be put in place are deemed an impediment to profits again, the same thing won't happen all over again. Anyway, while so many gazillionaires who put all their money and faith in this house of cards have been crushed, and while the average Joe will surely be badly hurt, those who were smart enough to keep some of their cash stuffed in a mattress or be lucky enough to have kept it in guaranteed cash accounts may in the not too distant future have the buying opportunity of a lifetime as the world's greatest companies will be sold off for a song in what may be the fire sale of the century. And while the siren song of the Warren Buffets and stock pickers of the world who make lots of money in normal times advocate "buy now," prudence dictates "never try to catch a falling safe." Personally I intend to keep my powder dry until I am convinced that a real bottom has been reached. And where might that be? How about DOW 2000?
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I remember not so long ago, the price of a barrel of oil was ten dollars.
Now it is over one hundred dollars.
So any Oil Magnate is getting ten times the income they received just four or five years ago.
Makes you think.
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The rich/poor gap may be widening- but let's face it, none of the diminishing British working class are going to starve.
It's a problem, sure- but I think there's a more pressing problem- the exploitation of foreign workers by our companies- the bedrock of the wealth of this society is no longer hard work not by our underpaid big strong working class man stereotype.
It's the hard work of children as young as five working 100 hour weeks on subsistence wages (Google Nestle/Ivory Coast- 286,000 half-staved children between the ages of 9 and 12 in that country working in obscene conditions to provide us with Mars Bars and chocolate enough to make us sick).
The clothes we're wearing now, out of season fruits, the toys our children play with etc- the very bedrock of our modernity lies on the shoulders of the exploited foreign worker, in plenty of cases literal slaves- nearly all the time wage-slaves.
Free Marketism hasn't negated abject poverty and exploitation, it's merely exported it to where we can't readily see it anymore. Where it can fester and worsen unseen while we worry about a little credit crunch.
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Spin, hype, agressive negative reporting is going to cause the biggest thing we all fear, job cuts, unemployment.
As a small business retailer, my business is growing steadily, I am looking to employ more staff, but..........
Every day for weeks we have a deluge of Hyped bad news...the big problem is the immediate reaction from the public is to suddenly stop spending. i.e Trade was great so far this month, but every day after more bad news, trade almost ceased..slowley recovering to a good level and then more gloom, ceased again.
Thursday, 2million unemployed by Christmas headlines, my business sales dropped on Friday by 80%.
Its me who looks like joining them it this rate!
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*It's a problem, sure- but I think there's a more pressing problem- the exploitation of foreign workers by our companies- the bedrock of the wealth of this society is hard work not by our underpaid big strong working class man stereotype.
Bad typo in my last comment! This is what it's meant to say, if anyone's confused (if anyone even reads comments this far down, that is).
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#143, oh pur-lease. BoE independent? Why is inflation running at nearly 5% - real inflation not the nonsense Brown replaced it with.
In terms of Thatcher I know she had a road to damascus moment whilst in opposition - having done the traditional boost spending on my department tip as a minister - but she struck me as far from Keynesian.
In terms of Brown, he is exactly a economic micromanager from the "targeted" tax breaks to fiddling with macroeconomic rules to massive public spending subsidized by debt as opposed to real growth.
As for 30s, supply side spending didn't really help much during the depression ( u can argue about whether it would have been deeper minus the New Deal ). The only thing that ended the Great depression in the US was WW2.
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149
When Inflation, real rate up at perhaps 12 percent at the moment, has reduced our pay and living standards far enough, UK Companies will be able to exploit us to make cheap goods !
I remember being told, automation would reduce working hours and raise living standards.
This was long ago, and well, automation has actually reduced quality jobs without raising living standards.
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er, unless the laws of mathematical constants have changed steady growth ALWAYS produces exponentially increasing differences between rich and poor. 1% increase in wealth of someone earning $1M is a lot more than 1% of someone earning $100. Steady growth is ALWAYS exponential:
http://betterexplained.com/articles/an-intuitive-guide-to-exponential-functions-e/
not that the world of finance and business works like a mathematical formula but it the word EXPONENTIAL always seems to be used with reports of "extraordinary" events or processes. In fact exponential growth is entirely ordinary.
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You see the proceeds of Automation have landed in the pockets of a very few people.
Though, if you do have a well paid job, Automation can deliver cheaper goods to your door.
Now Britain has been deskilled, like happened to India during the British Raj.
This makes the population less independent more malleable, more likely to obey and settle for less.
Except the Middleclasses.
They need to have their wealth removed before they can be knocked into a new shape.
So House prices inflate, people who are middleclass buy, house prices deflate and they are separated from their wealth.
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Of course, the Middleclass own Shares and Pensions so these too would have to be eliminated in order to reduce their political strength.
Funny we have just had a crisis severely damaging to the Pensions and Investments of the Middleclasses.
Now thinking about all these aspects, the only reason for an illuminated conspiracy to wish to accomplish any of them, would be to create a more Totalitarian State.
Now Totalitarian States generally do not advance Humanity, so would not fall within the Goals to ennoble and perfect Mankind.
Unless, one has a Dystopian view of what ennoblement means.
See Aldous Huxley, and of course the book 1984.
A totalitarian state is valuable during wartime, but even a limited War rather than just peacekeeping causes horrendous problems, even assuming there is no Nuclear exchange.
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149;
Starvation
Hm, at a guess, I would say that Britains food supply lines are very complicated and global.
A proper European war would in my estimation cut between 35 to 40 percent of our food supply immediately.
Air Interdiction and Naval blockading could reduce this a further 15 to 20 percent.
Damage to infrastructure within the UK could dramatically cut supplies, and production.
Should there be Nuclear impacts, farm output could collapse.
Should biological agents be used, quite honesty it could be the finish rather quickly.
My best guesses.
Puts Nationalization in perspective.
But hopefully no one is planning a totalitarian state.
Or any wars.
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#149, you don't have to go to Ivory coast to see the conditions people are forced to work in.
Read Chinese Whispers by Hsiao-Hung Pai. If it doesn't break your heart to read some of the mistreatment, then don't have one. This is one of the **real** disgraces of the Thatcher government, the complete screwing of the HK chinese.
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#150 - yes, you've been robbed of your livelihood.
You're not alone of course, same happened to my otherwise profitable and robust race engine firm and I can cite many, many suppliers and clients to who it has also suddenly happened. Except that, of course you are alone with the problem. No-one is speaking for you, though I have to say you should be lobbying your MP (of whatever persuasion). If you do nothing else at at least sign my petition at No 10 Downing St too:
http://petitions.number10.gov.uk/Harsh-treatment/
Don't fall into the trap of blaming yourself. This theft of livelihood, it's not your fault you know. Not that the state and its rich panoply of punitive measures and agents who deal with (sic) 'unsuccessful' businesses will care as they roll into action against you when you have finally exhausted the financial means to defend yourself.
GC
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152 Laughng black sheep
I have to agree with a lot of what you say but would rather you called Brown a micromismanager
I think some of these posters are just trying to wind you up
One of them actually called me, a miner's daughter {and proud of it} a Tory because they couldn't accept the truth
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You know, #152, I really didn't think I'd ever see a post that so comprehensively missed the point the original one was trying to make. Incredible.
BoE independence hasn't caused 5% inflation - but the idea that only interest rate policy could manage inflation, allied to reckless and unconnected fiscal and budgetary policy, plus a number of external shocks (food prices and oil prices), certainly has. Brown's irresponsibility is that he abandoned economic management. We've all seen both personal and corporate sector debt rise. All the great clunking fist's own work by default.
As for Thatcher as a Keynesian, I am as astonished by that statement as you - since I never made it. The woman was many things, but rational was not one of them when it came to the economy. Dogma came first.
On Brown as 'micro-manager', let's just be clear that even at his most, shall we say, 'creative' he was not - in proportion to demand growth elsewhere in the economy - actually having that much of an effect. That is the irresponsibility. He LET this boom turn into the inevitable bust. If anything fuelled growth through borrowing, it was international market conditions, not the work of Brown.
Let's not pretend that we didn't see it coming. We all knew that credit expansion had got out of hand. Brown's failure was not to call time on it earlier. He didn't, and we're all suffering. My case against GB is that he failed to do anything of any significance to prevent a recession. At any time. His economic management has been more rhetorical than real. His understanding of how this economy operates is shallow. That's his failure.
And now we are pretty much in a long, slow recession and the BBC seems to be revelling it in all, and hoping to tip us all into a full scale depression through the most negative, scare-obsessed reporting I have ever seen - presumably because they've got bored with the good times, and bad news lifts ratings. God help us if we ever see the conditions of the Japanese crisis of the 1990s here - the BBC will be encouraging runs on banks with live coverage from the queues outside them...
Hold on, though, they've already done that with Northern Rock...
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I'll certainly check out that Chinese Whispers book! Amazon reviewers all seem to love it.
I don't think that exploitation at home is at all justifiable, just that it isn't as pronounced and "in your face" as say, thirty years ago when it was obvious- on the news, in the streets, down the mines. We don't have any leftists forcing people to face the cause of their wealth anymore.
Socialism seems to be a spent force. It's a word furtively whispered on politics programmes and dismissed out of hand (it was said Socialism was "proved wrong" by the "success" of Free Marketism and the hiding of it's exploitation- can this argument still be upheld?)
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#161, re "the BBC seems to be revelling it in all, and hoping to tip us all into a full scale depression through the most negative, scare-obsessed reporting I have ever seen - presumably because they've got bored with the good times, and bad news lifts ratings"
The storm actually broke well outside the financial sector in mid Aug-Sep, long before the BBC even covered it. They cannot in any sense be blamed for presenting the truth of it, in part at least and I am sure they are doing that even if you are unconvinced. I am pleased they are covering it to a degree - albeit that their coverage (in my view) has nowhere near the breadth or level of seriousness that it should.
You might as well face up to it. This will be far worse than the Japanese downturn and the suddeness of the collapse in sales across the UK and Europe as a whole is the proof that something very unusual (actually never seen before in our lifetimes) has happened. The sooner the country realises we're all in this together the sooner it will sort itself out. Those with money should spend it and get things moving, the legislative and executive arms of Govt at all levels and the judiciary and the financial institutions should restrain their usual enthusiasm for hammering everyone and back off for a long period and let us get on with restoring normal confidence and trading conditions on high streets and everywhere else.
My view on the BBC is to an extent the converse of yours of course - and who says people should agree. But I trust you will agree that it is a least a good thing that this powerful medium is accessible to us and that we can speak publicly here on these issues because Parliament - the proper focal point for us - is silent on the matter.
GC
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#17
Nice Ad for your pal's airline
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140 laughingblacksheep
It would have been nicer if Brown had moved decisively in 2004 when it looked the BoE was going to hike rates to kill off the bubble, instead forced the BoE to follow his new inflation measure which meant the can got kicked down the road and now we are looking at an extremely deep recession.
Call me a cynic but had Brown tried to deflate the bubble at this stage would it not have shown that his economic competence claims were a sham and would have had the consequence that he would not have become PM
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150
What you are experiencing is loss of business due to the withdrawing of credit from your customers by the banks.
It is affecting thousands of small businesses across the country although that is no help to you.
The reporting we see is the BBC trying to report the true facts so we can all prepare ourselves and try to take whatever precautions we can to protect our interests.
Better we have this information than to remain in ignorance and have no defence when the worst happens.
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It's all relative. The gap may not shrink as you expect, but rather not grow as fast as it has done. In the end it really does not matter nor mean very much. Rich people may reduce spending, but even what they spend is eye watering to those on benefit, who need to make real spending cuts to make ends meet, ie heating on or off, new clothes for the start of school or 2nd hand, stale bread or fresh - the list is endless and pityfull. But wait a minute I hear the Daily Mail readers shout. Are not these same people work shy lazy good for nothing scroungers? Well very soon there will be millions more, what then?
What has been seen in the markets is just a reflection of society as a whole.
PS - Robert, yet again In turn on the TV and someone is having a go at you. Nothing like success to bring out the best in people. This time it was a no one mortgage broker be moaning your style. If he looked in the mirror he would see the real person he was complaining about.
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163:
The BBC must report in the interests of the Public.
The snag is defining what is in the Public interest !
Truth is a wonderful thing when it is wonderful and a dreadful thing when it is dreadful.
A true word can be useful or it can cause a lot of problems.
And of course, everyones truth is particular to themselves.
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Truth is often what people believe it to be, rather than its reality.
For example,
Is a Twenty Pound note a piece of worthless printed paper, or does it represent a weeks shopping ?
This is the trouble with the SIV s etc.
The true value is hard to appraise so traders attribute no value to them.
The truth becomes what they believe it to be.
Despite the possibility that there may actually be significant value left to them.
But every SIV, every Bond, every Bank is now guilty until proven innocent in a court that has made up its mind already!
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Is there a recession?
Well its true for you if you have just lost your job, or if your investments have taken a pounding.
If you receive a below inflation pay rise then the recession is true for you too.
Recession seems to be a very personal thing.
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@167 to right. robert preston for PM
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Can't see it being a bad year for the BBC Business Editor, with all that extra overtime coming his way. It's an ill wind......
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"159. At 2:07pm on 18 Oct 2008, guycroft wrote:
#150 - yes, you've been robbed of your livelihood.
You're not alone of course, same happened to my otherwise profitable and robust race engine firm and I can cite many, many suppliers and clients to who it has also suddenly happened."
?I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.? - Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
Well... Seems he could see the future.
I recommend you watch the following videos on Google Video:
Money as Debt:
Money as Debt:
[Broken URL removed by Moderator]
The Money Masters:
[Broken URL removed by Moderator]
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supercalmdown #148
Your data is obsolete. Oil was around $150 in July, it's now under $70 and heading south. The nature of the supply demand curve in a recession or depression shifts strongly to the oversupply/underdemand side of the equation forcing all priced down. This is because credit to buy anything has evaporated as money has been destroyed.
The numbers are staggering. They got this way because the problem wasn't appreciated until a drastic consequence of the underlying cause had become inescapably manifest by which time the size of it has grown beyond the wealth of the entire world. The risk has been spun outward from the center by shells around shells and now the most inner one is collapsing quickly. the innermost shell is the subprime mortgage crisis in the US. This was caused by several different groups each with their own motives. The Democrats including President Clinton wanted to make it possible for the American dream of home ownership to be available to everyone even if they couldn't afford a home by any objective criteria. Money was literally give away for the asking. Don't feel sorry for those who took it and will lose their homes or those who gave it away and will lose the profits they imagined but could never materialize. Object lesson in life, never lend money to people who have no hope of giving it back, you are not making a loan if you do but a gift. Conservatives saw an opportunity for their friends to make a lot of money on this scheme. Economists arrogantly felt the business cycle was over, they had so much control over what would happen that nothing could break the imensely strong US economy. It wasn't easy to break and it took a long time but in the end, nothing is indestructable as the forces destined to crush it become increasingly stronger. The best guess I can come up with is that somewhere in the vacinity of 8 to 15 trillion dollars worth of mortgages will go into default unless the government figures out a way to put a lot of dollars in a lot of hands very quickly. Built around this are 55 trillion dollars of credit default swaps, that is guarantees that large institutional borrowers will pay back loans, many of which were used to buy these mortgages in large packages of small pieces. Then around this are 300 to 600 trillion dollars of derivitives, other complex instruments even most economists and financial experts don't fully understand because they are structured to be indirectly related in complex ways to various financial performances of unrelated factors. When Lehman Brothers was allowed to go bankrupt, the house of cards began to crumble and the shock waves spread outwards. In the last few weeks several trillion dollars worth of equity on the NYSE and NASDAQ alone have already disappeared. Other markets around the world have suffered similarly. In the 50s we found a communist under every bed, today we are finding a huge defective financial obligation instruments under every bed. Even government financing at both the federal and state level is built on this house of cards of enormous deficits.
So far between the EU and US they have poured about 2 trillion dollars of money they don't have at the problem. What this has accomplished is to prevent the immediate freeze up of credit all over the world. This would have brought the world's economy to a screeching halt. But we don't know if even this is just a temporary fix. It certainly has little effect on the underlying problem and the markets know it. That is why they continue and will continue to go down. Studying the DOW during the great depression starting with the stock market crash in September 1929 there were around 7 fake out rallies in which stocks went up before falling the next larger leg down. It took nearly 3 years before the market hit bottom. We are only a year into this crisis as the market reached its peak of around 14,000 on the DOW around October 2007. There is no reason to believe that a much larger stock market crash and a worldwide depression is not a real possibility unless governments in general and the US government in particular prints money like it was going out of style. They've just started. Before it's over, between a huge new supply of freshly minted deflated value currency to pay off all loans, deleveraging of the markets on a massive scale, and a return to economic growth will have to take place. This could be years away. Meanwhile, I will not listen to Mr. Buffet whose successes have occurred in far different circumstances. He's never lived through a depression and has no track record to prove he knows the best investment strategy when one occurs. This is not 1987 IMO, this is much closer to 1929-1930.
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Dear Mr Preston,
Congratulations on displaying a totall lack of understanding the REAL state of afairs for those on state benefit.
Many will loose their homes, a lot of them will have their electricity and or gas services suspended and pensioners will remain cold this winter.
But, their 6% rise of income of oh Ģ56 a week is of course far greater then your 1% rise of 1,000 a week
I'm sure they will feel 'better off', not
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No-one can resent the wealth of people like Richard Branson or Alan Sugar.
Businessmen who have created wealth and employment from nothing by risk and hard work.
Also all small business people sink or swim by their work, and cannot be denied any wealth that they create.
But what has happened in the City is just the self-enrichment of a lot of financial staff, already well-paid, and who take no risk to themselves.
These people are EMLOYEES, not risk-taking entrepreneurs.
And yet thousands are now multi-millionaires.
The public feel cheated.
The wealth gap between the banking class and everyone else.....obscene, immoral and verging on criminal.
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Robert
You clearly highlight how bogus official 'poverty' is.
The rich getting poorer will mean that there are fewer people in poverty (as the average income drops) -- but they won't actually be any better off...
In the same way, the number of people classed as 'in poverty' was bogus all along.
The government re-defined poverty so they could use manipulate the figure to make themselves look good.
Most of the children who have moved out of poverty under labour did so by growing up, so not being counted as children-in-poverty any more !!
Most of the old people who have moved out of poverty under labour did so by dieing, so no longer counted as 'old-person-in-poverty'.
Conversely, most of the children currently in poverty were *born* under a labour governemnt, and most old people currently in poverty *retired* under labour.
Labour are responsible for most of the poverty in the country today -- and Browns raid on pensions, raid on income, and mortgaging of our future (as PFI etc) has ensured that many are doomed to poverty in future.
Abolishing retirement for the wealth creators in the private sector, so they can pay for the early retirement of the wealth-consumers in the public sector is little better than state endorsed slavery.
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What is really so sad about all this chat, is that it is way to late! Right now we have the SAME people throwing TRILLIONS at the SAME PROBLEMS. The dollar will fall now, the inflation this influx of out-of- nowhere cash will dictate this. The PAIN and HARDSHIP will be shared by millions of honest poor folks, very unfairly in the UK and USA. A new economic system will come, but from where? The Constitution and freedom that grew America and made us great, is NOT being used to work on and solve these huge problems naturally, and for all the TALK the frauds, traitors and super-rich will be let go with the middle class and poor paying the painful, longterm bills. These very costly, patch-up events of the past two weeks are NOT going to help a more FAIR SOCIETY at all... BIG TROUBLE AHEAD! The Communists must be jumping for joy!
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The reality is that everyone is going to be losers from the situation which regulators should have managed far better -where and when did anyone think that 130% mortgages were a good idea- and which rocket scientists were considered credible enough to be listened to and undo 200 yrs of industrial/commercial interconnectivity?
This is officialdom at its craven weakest gone mad - in fact its so awful that you have to consider Brown wanted it to happen.
Now where - well the reality is that the banks still control the purse strings and offer the vehicle for poor but well educated entrepreneurs to climb the ladder.
In an adverse economy their risk profiles will be an even greater anathema to bank investment analysts.
If anyone thinks this is going to mean anything other than a massive, once in a lifetime acceleration in the haves and have nots then they are seriously wrong.
There are thousands if not millions of low value commmercial assets in the market which perfectly match the growth models of the investment banks and Mr Peston has gone beyond the reporting of valuable news and become part of the reverse process of a bubble - a rout.
There is little doubt that we have to go back to basics here and the welfare state is most at risk in such a scenario. These are phyrric victories which welfare dependent people are going to quickly see vanish before their eyes.
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yes this is becoming a unfairer society, people are now working hard so support people who can work but don't and have no intention of. When disability benefit was first set up there were 700,000 disabled in the uk there are now over 3 million and has increased nearly 5 fold in cost. that's 5% of the population are now disabled 1 in 20.
Moreover, It is the first time in history that two generations are drawing their pensions and with birth rate fallings and people are now getting older before having children so whom is going to pay of these 6% extra in benefits the average working person who get about 2% salary increase. Just borrowing more money to pay for benefits is just mad and economically suicidal because what happens next year or the year after just borrow more? With borrowing money you do have to pay it back!
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Lots of talk about the "idle poor" in this thread. Are you talking about the unemployed- on insignificant amounts not because they choose to- but because bosses have laid them off? People made-ready by the education system for jobs that aren't there?
Or the employed poor- still on insignificant amounts despite putting in more hours and more effort than any of the rich?
What about the 100 hour-a-week subsistence wages foreign workers that provide "successful businessmen" with their "success"? Or the much-maligned immigrant worker- the high productivity, low cost immigrant worker?
What about the idle rich- the landowners, those with inheritances, those with wages hideously out of proportion with their productivity? The money jugglers who produce nothing and get millions for it?
This stereotype of those on welfare is abhorrent. It's pure media fuelled ignorance.
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"154. At 1:45pm on 18 Oct 2008, trikidiki wrote:
not that the world of finance and business works like a mathematical formula"
Actually... It does. It's predictable.
Oh not on an individual basis certainly, but if you look at a chart of base rates over the last 100 years or so, you can see there is a very distinct exponential curve; up to an astounding peak during the 1980s and then an exponential decay.
Interest rates will continue to go down to near zero over the next couple of years as the debt collapses BTW. Then the credit cycle will start again and they'll go back up to a peak of around 15% in another 40 years.
Looks like it will take about 10 years for credit growth to really begin again. Anyone retiring in the next 5 years? Your pension fund just taken a *huge* hit? Well. It isn't going to get any better. Sorry.
Then you have the exponential decay in the value of the currency. Because more is being created all the time it is always worth less.
Course we could switch our monetary system to Full Reserve lending... Nah, what a STUPID idea. We all want the booms and crashes to continue.
Long live The City...
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#174 MarcusAureliusII
I agree with your view of things except that Mr Buffett DID SAY the CDO's were financial weapons of mass destuction some time ago.
One should respect Mr Buffett's opinion as you must know what you are doing if you have as much wonga as he has.
Now that we are in this mess what should we do? Nobody knows who owes how much to whom.
Apparently we will get an insight on the 21st when Lehman's CDS settlement is due.
The other can of worms is the Fractional Reserve Banking which, from the model, is required to be ever expanding to work.
We have now come to the limit of growth. We are nearly (possibly already) out of sufficient water, food and oil for the number of the people on the planet.
Despite the above, I cannot suggest an alternative. Less people would be a start.
What were all the internal and external Auditors doing when they valued these SIVs? Where was the FSA?
It seems Swap is another name for insurance. Insurance would have been regulated.
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i understand from comments made earlier that some think the unemployed live the good life on benefits well the only ones that live the good life on benefits are those dishonest enough to cheat the system and obtain benefits they are not entitled to, my wife who is disabled and i made an error on a form and thus we have to live on just over one hundred pounds a week and thus after paying gas electric water and other licences we have just over twenty pounds a week for food, so those who think honest unemployed live a champaign life style should be ashamed of themselves.
the government are out of touch with reality and any person wanting to become an mp should spend time in the lowest sector of living in the country then they may well be worthy of earning there wages as mp's.
anyone who knows someone obtaining benefits by deception should turn them in.
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There's an old saying about ill winds etc.
Maybe the retail sectors problems will mean less shopping channels on Freeview as well.
By the way the BBC has the solution to banking problems in its archives - Mr Mainwairing of the Walmington on Sea branch didn't do sub-prime lending !
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While Rome burns, Nero fiddles with his secretary..
http://news.bbc.co.uk/1/hi/world/7677908.stm
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@105
I wish you'd tell me what countries have not used the monetary policies of Friedman whether they knew it or not for I'd like to move there. It's in part the fault of the monetarists (to give them their TRUE name) that we have this current problem. The central banking system is at the root of this problem, with their price fixing of the interest rates at a level far below a true free market rate of interest, causing this bubble to emerge. That's why they're called monetarists, because they believe the government should manipulate the "supply side" of the economy while the keynesians support government control of demand. If you want a school of economic thought that really describes how the world works, look into the "Austrian School of Economics".
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Wow, what a wonderful discussion. I've just tried to read - well, skim anyway - more or less everything. It's made me think again what an amazing thing the Internet is, the World Wide Web is, even BBC blogs are.
Amongst all our discussion of recent history, inevitably going back to the iconic Margaret Thatcher, it's worth pondering that precisely as her time was up the Web was being dreamed up by a young Brit, Tim Berners-Lee, working as a contract programmer with his own small company at a massive government-funded outfit in mainland Europe called CERN. Tim of course has never made any money at all from his brilliant, world-changing design in 1990 (of the three key pieces that still make up today's web: HTML, http and the URL). It was someone else who in the mid 1990s made a much lesser contribution, American Mark Andreessen of Netscape, who became the first multi-billionaire of the Internet age. The recent graduate needed some capital to get the first mass browser finished and in the hands of the world. Jim Clark of Silicon Valley famously said on being approached: "Nobody ever made money from the Internet." He changed his tune and they both hit the multi-billionaire bracket, even after Microsoft had viciously competed - by fair means and some foul - to take 'em down.
But Berners-Lee, who to any fair-minded observer did far, far more than either man - or indeed Bill Gates - to create what we benefit from today, didn't make nuffing.
I've met Tim just the once in the late 90s. He's a fine man who was never a total altruist - he admitted to me that he felt he'd been an idiot not finding a way to make money out of all of this. But looking back, I'm sure the timing wasn't right for that then. If he had had an obviously commercial angle other companies and institutions would not have bought into the Web at all and the world as we know it would be a much poorer place.
The story is an interesting and inspiring one. And it proves this fact beyond all doubt for me: monetary rewards are never, never fair. Never have been, never will be.
Try Thomas Sowell on The Quest for Cosmic Justice if you find this hard to cope with. It's great for getting the impossible to achieve and unhelpful to fret about right out of your life. Trust me, there has to be more to why we're on this planet than this.
Still, hats off to laughingblacksheep for calling the market right two years ago. That's fair enough. As fair as it gets, in fact, that he - note we assume blackie's a ram, which again shows the basic unfairness present in all of life - will do better than other poor lambs with more assets than sense who slept-walked into the credit meltdown.
Better that kind of rough justice than a government that tries to make things a whole lot fairer than they can ever be.
Still, as our friend sheepie also points out, the likes of Mugabe, Pol Pot and Mao prove that government, although it has great limits on the good it can do, can do almost limitless harm. That asymmetry is one of the key points made by Paul Collier in his seminal book last year The Bottom Billion. Collier started as a "Oxford revolutionary socialist" in the late sixties - as he jokes now, a name beyond parody. But as I see it he's kept learning and caring for the poorest of the earth.
I'm grateful therefore to MikeSC6 (#149) for turning our attention to the needs of the real poor on our planet. The answers for them are never as simple as they seem though. Collier is a great place to start, in my view. Preventing a new Great Depression would also help.
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I wonder how new this 'gap-widening' or 'fairer' society is in socio-historical terms.
Economists tend to use various quantitative indices (Gini and income distribution) or fixed models to gauge the level of social disparity but often fail to take into account a host of often significant factors that affect people's consciouness and thus evaluation of their real situations.
Peston's observation is interesting, but I think things could be far more complex and equivocal on a micro level of the individual than the current global financial crisis and state welfare system would suggest.
It is not whether Britain is getting fairer or not that is the point. It is the ever-changing ways people make of the reality--in opposition to others/other countries--that merits first investigation.
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#180
"yes this is becoming a unfairer society, people are now working hard so support people who can work but don't and have no intention of."
Hang on there, were are these jobs (even if you do expect families to move around the country), the official figures given only last week state that just under 2 million people are registered unemployed yet the Govt. minister stated that there was only 600,000 (registered jobs) available, even if one accept that the various employment services - both state and private - don't have all jobs listed it still means that there are obviously far less jobs available than needed and it's only going to get worse the further the country slides into recession!
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Wealth redistribution. A Socialist dream. However, wealth creation, a market reality. If we cannot sell goods and services because buyers are not there, and we cannot borrow enough credit to help finance making the goods and services, who prints the cash to survive. The Government. It finances this by raising IOU's called Gilts to pay for it.
Less demand for goods and services, companies cut back costs (staff) and unemployment rises. In turn this creates more pressure on benefits and other government services.
The next few years are going to be hard unless we innovate. With this government and its centralist policies - fat chance. Look forward to a legacy of debt that will take decades to repay and we as a nation will all be poorer for it. Pity our children.
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Toldyouitwould #183
"#174 MarcusAureliusII
I agree with your view of things except that Mr Buffett DID SAY the CDO's were financial weapons of mass destuction some time ago."
"We should respect Mr Buffett's opinion as you must know what you are doing if you have as much wonga as he has."
Mr. Buffet made his money under a different financial and economic paradigm than we have today. I have no idea how much money he lost in his and his investor's net worth in the last 12 to 18 months but I am certain it is far more than I have even when taken on a percentage basis. Mr. Buffet's strategy is not applicable in this market. The place to be right now in the deflationary part of the cycle is IMO cash. This comes from classical economic theory. In recessions and depressions, cash is king. Buffet's buy and hold strategy would prove a disaster and now is not the time to be buying stocks AFAIAC. If and when the printing of money begins to create an inflationary cycle, stocks will be the place to be until interest rates rise above a certain point, around 6 or 7% probably at which point real assets will be the equity of choice. When the cycle peaks again, the most desirable asset becomes long term high quality bonds. Right now I am about 10% in cash, 1% in stocks, and 89% in real assets. I'm betting that the government will choose inflation over depression. Ironically, the real assets I have chosen have not dropped much over 10% from their highs during the last year or two. No matter what asset class you invest in, quality matters. Investing in stocks to be patriotic as Mr. Buffet suggests is insanity IMO. It is not patriotic to go broke. Rather than listen to one guru or another, I prefer to learn how economics works and think for myself. This is the key to survival.
If it is any consolation to anyone, the worst thing a con artist can do is believe his own scam but that is what many professional "investors" do. The put their money where their mouths are and will go broke with the rest of the speculators. This wil cut them down to size and remind them that they are human like the rest of us. Undone by their arrogance, some may actually commit suicide. This does not trouble me as life without porches, vacation homes, yachts, private planes, and a fleet of limousines is actually bearable. For those who held back and resisted the lure of fast easy bucks, if they have worked hard to develop a trade or profession which the world cannot do without and is in demand, they will fare very well while the majority didn't due to foolishness or due to circumstances couldn't will suffer. An economic depression is not a catastrophe for everyone, for some it is a golden opportunity.
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#191
I think that translates into "I don't want to pay my fair share of the tax burden"...
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This 'pick' is so off beat, I think RP should take the weekends off in future
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"Wealth redistribution. A Socialist dream. However, wealth creation, a market reality."
Socialism as I understand it doesn't deal in wealth or profit. In capitalism, simplistically, a worker gets paid what the employer judges the work is worth. The employer then sells the produce for much more than they considered the production of it to be worth. That's profit!
Socialism/Communism has no "profit". Everyone gets paid equally, and that produce costs to buy the amount it cost in hours and materials to make- with no "profit" expectedd. Stuff is made to be used, not to be marked up.
The whole concept of "profit" is really just a con according to socialism. Workers make goods, get paid for the goods. Employers sell these goods back to the workers for more than they judged the work producing it to be worth. This is called profit! The employers produce nothing themselves, and don't organise or help with the production. They really just mastermind and benefit from the "profit con".
That's what I understand the thinking behind socialism to be- wealth isn't even an issue.
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Great blog....deliberately provacative!
And even better posts.
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Is it not a little odd that the words that so characterise the melt down in the financial world are words more usually at home in the spiritual realm - faith, belief, trust, confidence, humility of requests for help - when the words are broken, when the 'diction' is shrunken and trapped then addiction is the vain cover of the malediction that has been denied and that can be denied no longer.
In the contradictions of the recent political efforts the tattered dictions of the last 10 years are opened and there is a chance for the benediction of human values re-entering the system - faith, belief, trust, confidence, humility of requests for help.
We have to work to keep the windows and doors of this new 'diction system' open lest they be slammed shut by the old guard.
The words that seem to have deserted the bankers should never have been locked in their vaults in the first place, they were stolen from our hearts.
Now we are reclaiming them as human beings, we must guard them in the vaults of our individual hearts, maybe then the politicians will be returned to being our servants as they so often like to remind us is their real role.
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I have work for a major supermarket retailer, and have done for over 5 years in the IT department. I recently had to re-apply for my job. Has anyone else had this experience?
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In the real world they are a total irrelevancy. They manage to pay very little in taxes, so are of no benefit to us. What is important in the real world, is that we are all poorer, and we will be taxed more in the coming years. We are governed by MPs who have no idea what it is like to earn a real salary, pay for everything you do, account for every item on the expense sheet and provide a receipt. We are also not receipients of gold plated pensions.
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Clearly something I wrote in the middle of the night 3 am yesterday caught some sort of sensitive spot and so our vigilant moderators pulled what I recall form the claret haze as being quite a pertinent though given the hour maybe slightly vitriolic addition to the debate { no doubt with some justification].
Simply I was endeavouring to contribute that it is important for those who have the position to influence others even if its just your friends in the pup do use it well and speak with the authority of thoroughly researched accurate knowledge or real experience not just some personally biased or inflexible political stance.
There is no right and wrong in most of life?s trials and stereotypes often turn out to be a vocal minority. As mediocrity holds sway in any argument whether for good or bad there is little chance though of getting the future right using any model we have used for the last few hundred years yet again.
We need some way to cooperate in debating from all points of view a solution to take us forward for whatever we have had in the past has failed and there is little point waiting burying our head in our hands until it?s over. If we are serious about creating a better social economic climate then we need to starts having that debate now. Not when things are back to normal or back on the road to the next boom or bust. Because I am not so sure the western economy or the resilience of its people rich or poor wherever they are cast at the end of this or the next cycle will be robust enough to take it on. For me for now its back to the solace of the claret.
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This comment was removed because the moderators found it broke the House Rules.
#198 Branco123
What is happenning is that no one wants to create headlines of job layoffs. When the company I worked in downsized by 30 percent of all staff it was done in instalments and quietly so the media could continue their love fest with NuLab.
I was not aware that effectively permanent staff are now classified as contractors or temps which seems to be what you are suggesting. Any employment or unemployment figures produced by this government are spurious and unreliable. Frankly the total population of the UK currently is anywhere between 50 and 75 million - your guess is a lot better than the Home Office!
I am sympathetic with your plight but am not surprised with one of the most vindictive and nastiest governments that this country has ever had. For business, but against the people seems to be the norm.
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There seems to be a disconnect between what I see on CNBC in the way of facts and what I hear from the Fed, Treasury, President Bush, Franks, Dodd, and assorted financial pundits, and other observers of the economy and finances. These people all seem optomistic talking about a relatively short recession perhaps lasting through the first or second quarter of next year, talking about business as usual, recommending buying stocks. But the facts suggest that the entire economy of the world has become a house of cards teetering on the verge of total collapse. It was only the infusion of around two trillion dollars between the EU and the US governments in the last few weeks that kept it from coming to an immediate grinding halt. We still see LIBOR very high reflecting an unwillingness of banks to trust each other's credit worthiness. None of the fundimentals have changed. The US government will have to figure out how to keep millions of families from becoming homeless because they can't afford their houses any longer and how to keep banks from accumulating entire cities worth of empty houses gathering real estate taxes, insurance costs, maintenance, and dust in lieu of principal and interest payments they should be getting or other sound assets they should have invested in instead. Meanwhile all of the government economists and legislators who were part of the bail out are congratulating themselves and each other on what a fine job they have done with the bail out completely forgetting that they were the ones who brought this fiasco upon us in the first place.
When the history of this era is written about, assuming that there will still be any people around to write it, I think two questions will come up. First, why was the government so stupid to remove all of the regulations that were put in place in the 1930s to prevent another depression and second, why didn't many people see it coming and warn about it? I think the only plausible answer will be that the human condition is to be entirely irrational and that most people see only what they want to see. I hope I'm wrong but this looks like a train wreck to me and I don't see any way to stop it. Two years from now, will every government in the world be broke?
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*202 excellentcatblogger,
I see that you have questioned the population figures from the government.I myself have seen some speculation last year about whether we in fact have 75 million people living here,supposedly based on a suppressed report from a supermarket industry analyst firm,that analysed the food bought in the U.K`s supermarkets and shops, and came up with 75 million(hopefully they took into account our expanding waistlines, eh!)
I did`nt chase it up at the time
so it would be great if you or someone else can produce a link for that report.
Please forgive me everyone if I sound like I`ve indulged in too much nutty fruitcake,but something about it rings true to my ears.
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@204
A link for you.
http://www.independent.co.uk/news/business/comment/city-eye-facts-on-a-plate-our-population-is-at-least-77-million-395428.html
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*205 hodgeey
Thank you very much.
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Dear Great Pesto,
The first and final words on the 'great
banks' of America should come from
someone who saw all these problems
centuries ago....
'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.'
Thomas Jefferson 1802
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#202
All unemployed figures from the last 30 odd years have been unreliable, even Callaghan twisted the figures at the tail end of the 1970s - only for Thatcher to totally fake the figures in the S by removing those who were on short term 'training schemes (such as YTS), sending anyone over 50 into 'early retirement' or putting anyone with anything more serious than arthritis in their thumb on disability benefits, all designed to keep the headline figure down as low as possible.
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Mr Peston,
The banks must have known about sub-prime losses long before Northern Rock went under.
And yet they did not include these losses in their balance sheets or profit statements until well after that time.
So huge bonuses could continue for longer.
Is not mis-stating true profit and loss a criminal offence?
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198 branco123
The objectives can vary but in some cases it is to destroy the continuity of contract of employment. I practice if you do not cooperate you can lose your job, the prospect of possibly being made redundant with the associated minimum government payout is not attractive so staff almost always, (in fact always in the cases I heard of) waive their rights and sign a new contract. It is not easy to describe it as ethical but in reality it is easily done. There are advantages to a company in placing at least some staff on rolling contracts, it is easier to get rid of some of them in the future. Just because you are placed in this position does not mean you are future targeted, it is usually an across the board implementation. In some cases the entire operation can be transfered to a new holding company overnight so you end up with a new job and a new contract and a new company and no accrued employment protection. Companies can ringfence liabilities, both external and internal, in this way. You are most unlikely to find any knowledgeable practical advice or action you can take.
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#203 MarcusAureliusII
Let me have a go at suggesting answers to the questions that you ask:
First, why was the government so stupid to remove all of the regulations that were put in place in the 1930s to prevent another depression and
All governments, and more importantly prospective governments, have a tendency to be 'snake oil salesmen' that is how the system is set up. Easy money and getting something for nothing is a suggestion that all of them use, which we are liable to believe - and we did so, without serious consequence to date (or at least till the now). We the voters voted for the credit crunch. We get the governments we deserve.
second, why didn't many people see it coming and warn about it?
Many people did see the problems coming, but were sidelined and ignored - that is again due to the dynamics of a democratic society.
I do not think the voters were being irrational (as you put it), just short term in their outlook, in the same way that we still build houses on the flood plain of a river. It is entirely rational to get things today and forget about the future. I do not believe it can be said to be irrational.
It was rational for society to want the phosphorus safety match, but irrational to expose the matchmakers to phossy-jaw and a painful and early death. (see the London matchgirls strike of 1888.)
Next you will be agreeing with the green movement and closing airports and making us walk everywhere - possibly an entirely rational reaction to the despoiling of our green and pleasant land, but the immediate costs of which still prove to high for the voters to accept - perhaps their day will come and you will be writing about why we didn't see it coming and try to prevent it.
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#209 stevewo
On misstating a true profit and loss
In the UK directors sign off a set of accounts and these accounts are audited, by independent auditors as required by law.
What directors sign, and auditors agree to is a 'true and fair view' - not an absolute truth under all circumstances. Companies that are trading rarely go bust and in consequence most accounts are drawn up with the view that the company is an 'on-going concern' that is to say that the business will continue trading and it is entirely reasonable to assume that trading will continue.
Accountants and their business clients (just like Enron) take advantage of all loopholes in the law to give a rosy complexion to their figures. Is this unreasonable when competitors are doing the same things internationally? Well possibly, but that is how the system has evolved. There are periodic attempts to strengthen oversight (e.g. the Higgs Reforms- mostly unimplemented and, as well watered down in the Companies Act 2006).
Should the (largely unsuccessful) Serious Fraud Office look into matters relating to the Credit Crunch? - perhaps. But the proposed and required strengthening of the law to make it easier to prosecute and get a conviction of directors has not been implemented so don't hold your breath.
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> However, if you are living on benefits or
> you depend on a state pension,
> there's strikingly good news.
Gosh, those greedy bankers have been cunning. First they suck all the money out of the banks to build their cash piles. The banks go bust and the bankers end up on the dole themselves; but by then the benefits are vastly improved - you have to admire their timing, eh?
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#159 Thanks for the link. Will do. Just responded to DCs VAt deferal idea....
#166 This is not the case of credit being withdrawn in this context of an example.
My biggest concern, it that whilst the bigger fiscal crisis is played out on the global stage, we at the grass roots of the local and regional economy have a vital role to play to ensure that we sustain each regional economy.
My worry is that whilst I and my customers are commited to shop and spend with other local businesses, these scares stop us with immediate effect. Here is an example of spending for my business
Avertising in local business publications Ģ500 per month. This supports the local teams running the publication etc. I am about to pull the plug on Decembers as I am not sure I will have the cash flow to support it
Employing Christmas Staff, now on hold as I am worried we won't get the trade
Buying Stock reducing levels of Christmas lines (a key supplier is a local business)
Therefore the massive impact of such negative reporting is in danger of killing the real economy stone dead.
What I would like to read is of course the news as it is, but with a positive slant rather than a negative one.
Some of us are optimists, some are pessimists, think positive for a change.
On this positive note:
I ask every tradesman that comes into my shop how is business for them. Every one bar the bigger house builders have orders booked into the new year.
90% also feel that this day of reckoning was long over due in the housing market and that it will drive house prices to an affordable level for the long term
85% of trade who are in the home improvement market are enhancing home-owners homes. Therefore people are not moving but improving.
99% are positive about their own futures.
If the media does not change its reporting angles, then this level of bouyancy in the local economies will evaporate rapidly, as I see in my trading patterns. My concern is that not only was Friday's trade dire, so was yersterdays. 90% down on the previous two Saturdays.
Now I know that in a couple of days it will recover, but if we keep getting hit with "We all Doomed" it may not recover.
So is everyone broke?
NO! I am not seeing an increased amout of credit card payments, but many more debit card payments. Therefore people are spending cash, not credit.
What are they buying?
When they shop are they buying cheap. No they are buying quality and paying more. Quality is selling over poorly made items, so the intent on the purchaser is to buy a product that will last longer and therefore is more economical in the longer term
This is very very positive news. We are as consumers looking to keep spending, of course more cautiously, we are recognising that keeping our local economies running is critical to all of us. We understand that the financial world is a mess, but it is now going through a long over due overhaul.
What is critical is that we remain 100% positive about the events in the financial world today. If Joe the Public loses this, then the country is in deep trouble.
So please lets switch this reporting to be upbeat, realistic of course, but in the end everything will sort it self out one way or another. The Sun will rise tomorrow and will do so for millenia to come. Lets enjoy what we have now and be happy, even though not ideal, its where we are!
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#128 laughingblacksheep
I think I see where you are coming from now.
I would like to offer you three thoughts.
It is a very different world than it was 30 years ago, the economy is a vastly more complex system than it was and the principles she applied my not work today.
The price many people paid in the 80s was unemployment, many of us regard the mangement of unemployment as part of the responsibility of the system.
The house price crash following the late 80s boom certainly seemed bad enough to those of us who ended with negative equity. The scale of the crash was probably less than the coming one because self certification mortgages, 125% mortgages and very high income multiples were not available.
Cheers
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10 years of a Chancellor apparently committed to, and wrecking the economy in the name of, fairness, and we only get improvement when his policies have manifestly failed. Can we now acknowledge that micro-management according to interventionist, neo-classical principles not only doesn't work, but usually has the opposite effect to that intended?
The alliance of the Labour government with City institutions, the former in failed pursuit of deluded "progressive" policies, the latter in successful pursuit of financial advantage, to the beggarment of most of the rest of us, is one of the most shameful and destructive episodes in the tawdry story of our polity and economy over the past century. And the opposition offer us only variations on the theme, not fundamental change. Will we wake up before it's too late, or will we continue the post-1848 decline until we have consumed all our capital and have returned to the dog-eat-dog, beggar-thy-neighbour world from which classical liberalism offered an escape, but which we seem determined to abandon?
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#214
"So please lets switch this reporting to be upbeat, realistic of course, but in the end everything will sort it self out one way or another. The Sun will rise tomorrow and will do so for millenia to come. Lets enjoy what we have now and be happy, even though not ideal, its where we are!"
No, lets report the facts, if they are upbeat all well and good but if the facts are down-beaten then that is still well and good - it means that people (including business) can plan for the future and not suddenly be left floundering in a sea of debt with on life boat in sight.
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Thanks for your thoughts 212 John from Hendon.
Many people believe that the banks "concealed" their knowledge of massive sub-prime losses long before Northern Rock went under, and kept these losses off their balance sheets and profit and loss statements so that they could continue with their vast bonuses.
Have bankers, in fact, paid themselves a lifetimes' earnings in bonuses because THEY KNEW MASSIVE FAILURE WAS COMING?
Concealing that knowledge, under company law, must be a CRIMINAL OFFENCE.
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"Think positive for a change" AndrewRob.
We've just had 15 years of "thinking positively", thinking that things can only get better so long as we ignore the structural problems and keep chucking money out of the helicopter. A dose of reality is a welcome, if painful change.
As always with rampant monetary inflation, we've had massive malinvestment, which eventually has to correct itself. If you are hoping that a return to deluded optimism will solve our problems, and not preparing for a severe downturn, please post the name of your business, and those of us of a more realistic bent can look forward to picking up your assets at knock-down prices from the receivers within 12 months.
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Andrew 215
Your response is that of a person in denial.
To suggest that everyone should continue to be positive when in a pending position of financial Armageddon around the world is very flawed.
You justify your view by suggesting the populous and its spending patterns are fine and many are just using cash to purchase instead of credit. You further justify your thoughts by stating DIY on peoples residences is replacing selling.
Have you seen the profit warnings of the major DIY retailers? Have you forgotten that credit has been withdrawn from consumers as well as businesses?
People are using cash because it is the lender of last resort. As a result, the self restricting budgets of peoples salaries are the only thing left to use to buy.
As this happens, the shape of the world is being redrawn again- the only way we can go is back to restrictive lending to credit worthy consumers limited to a small multiple of earnings and high deposits.
The effect of this change is going to have enormous implications to all. Many business failings and many unemployed. You will see massive spending on social housing because that will be the only way to house people and together with other public borrowing programs will be the only way to restart the economy. he UK will follow more closely the European housing model of rent rather than buy.
So being positive - This will hopefully repair the damage done over the last 30 years by going back to nationalisation of 'cant fail' organisations like rail and bus,gas, water and electricity, but without the power of the unions to hold them to ransom.
The 'lucky' fully employed will be able to purchase cheaper housing because they have been able to save a reasonable deposit.
Contrary to your assertion that people will continue to spend cash you will find that people will be encouraged to save. For without saving the new regime cannot exist. With the demise of the Fractional Banking System, Banks and Government will be solely reliant on Joe public's savings in order to lend and spend.
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Time for a Citizen's Income.
Once the money supply system is nationalised we can all benefit.
"Money will cease to be the master and become the servant of humanity. Democracy will rise superior to the momney power."
Abraham Lincoln, 1865
(assassinated soon afterwards).
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"In the capitalist society there prevails a tendency toward a steady increase in the per capita quota of capital invested. The accumulation of capital soars above the increase in population figures. Consequently the marginal productivity of labor, wage rates, and the wage earners' standard of living tend to rise continually. But this improvement in well-being is not the manifestation of the operation of an inevitable law of human evolution; it is a tendency resulting from the interplay of forces which can freely produce their effects only under capitalism. It is possible and, if we take into account the direction of present-day policies, even not unlikely that capital consumption on the one hand and an increase or an insufficient drop in population figures on the other hand will reverse things."
Ludwig von Mises, "Human Action" (1949)
Ob-la-di, ob-la-da...
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#216
It hasn't been the interventionists and their interventions that have failed though, it's the un(der) regulated free market that has (CDSs etc. are hardly the meat of interventionist policies), if it really is the fault of intervention why has the intervention of the last couple of weeks caused a lessoning of the downward slide, why has even Bush, Paulson and Benanke decided that intervention is requiered?...
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#216 bgpslz
wrote:
wrecking the economy in the name of, fairness
Exactly in the 'name' of fairness! The 'name' of fairness that abolished the 10p tax band!
Politicians quite often do things in 'the name of'. e.g. invading Iraq in the name of promoting democracy - need I go on.
I also applaud your reference to 1848 for it was the Revolutions of 1848 that gave rise to the modern Europe and of course the highly influential work 'The Communist Manifesto of 1848' and the previous analysis by Marx etc. of the problems within Capitalism and the idea that we should strive to work towards another way.
It is our tragedy as a World that even though the lessons of history are well documented we seem unable to get away from needing to re-live them. Capitalism and more importantly Democratic Capitalism still has many of the same the contradictions within it and it still lacks the mechanisms to overcome, and in particular foresee, the problems and avoid them.
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"The 208. At 09:54am on 19 Oct 2008, Boilerplated wrote:
#202
All unemployed figures from the last 30 odd years have been unreliable"
The CPI and RPI inflation figures are equally, if not more manipulated.
Look up "geometric averages",hedonics, imputations with respect to the figures. It's laughable. Our CPI and RPI figures actually represent inflation with anything which remotely inflates in price well and truly removed.
The true rate of inflation? Well the money supply has been running at 12-14% for, well at least a decade and probably far longer. Real growth in real stuff is limited by the physical limitations of the real world; 2-3% so 8-10% is closer to the real value of inflation.
This matches with some gold bullion I bought a few years ago. Ģ340 per ounce at the time. Now...on ebay. ~Ģ600 per ounce. The thing is, gold doesn't actually appreciate in value in reality. It's largely useless other than by nature of having a limited supply and looking shiny. Gold pretty much just sits there holding about the same value, for centuries. If I traded in a coin, I could buy myself a nice suit of clothes in any century going back to the year dot.
So? Paper, paper everywhere, just as much as you can print.
Basically... You are all taking a 10% pay cut every year. Both the Conservatives and Labour have been presiding over this fraud of a political and financial system and the British people have been letting them get away with it.
You get the government you deserve.
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#214: No thanks to self-censorship.
People need to take informed decisions for themselves and that comes from taking a long look at the worst.
As they say on the sports news, if you do not want to know the result, look away now. That is your prerogative. The rest of us would like the news reported as it is, however unhelpful it might be to someone else. Few in this country are willing to give up the priviledges of democracy (such as a free and critical press) to share in an engineered "helpful" state of denial.
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To reply to the comments
My comment is a commentary on the way the "NEWS" is reported and the impact it has on the local economy. This is not a comment on denial nor on my not accepting that there are, indeed, many things to be concerned with. However, what I find very frustrating it the way the "latest headline" is reported.
We need adult to adult dialogue which we can then make strategic desicions. There are many positives in play at the moment and these also must have a voice.
My single point (no suggestion in my post, about "...hoping that a return to deluded optimism will solve our problems...." bgplsz) being, is that the current way that the news is reported is so black, it is creating a "flight" not fight attitude in the local & regional economies. Therefore as soon as the " Two million unemployed by Christmas", headline has been broadcast, the fear factor kicks in and everyone stops spending, whilst the headline itself is alarming, another way of putting it, "Forecasts predict unemployment ,driven by the current crisis, will peak at 2.25million by late spring"
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It is pretty disingenuous and inflammatory to suggest that those on state income will benefit at the expense of the taxpayers. There may be genuine concerns in society about those of working age on long term state incomes, but those rises, in ratio to the rises in gas prices are minimal. Most of that money will end up in the pockets of the Russian oligarchs. We could perhaps argue that wages should rise or at least be spread better amongst society. Can you think of any individual who deserves to earn more than 5 times the average earnings in your company. If their was a limit like that don?t you think it might be in directors interests to make sure workers are paid well, and wouldn't that benefit the economy right now.
I guess we will hear lots about keynesian investment by government to get the economy going again in the near future. This activity would tend to work with recessions caused by housing boom crashes or stock market crashs but could well be counterproductive when credit availability is limited. To be fair to the government, suggestions seem to be about pulling forward spending and using unspent moneys rather than issuing more debt. Every pound spent on a gilt (government debt) is a pound not saved or invested and so is a pound which cannot be lent out by the banks. I just don?t agree that an increase in public sector borrowing is seen as a good thing by many economists in these particular circumstances (Krugman perhaps being an exception).
I am surprised that Robert has not really explained the workings of the wholesale or offshore money markets in any detail because this seems to be key to the problem in the UK. We in the UK don?t save enough to meet all the lending requirements in the UK, so we have to borrow from banks where they have a surplus of savings or from investment banks who can parcel up the loans and sell them on. With the investment bank model being rather broken and savings in some key areas like Japan and China slowing as the global economy tightens that wholesale market money is becoming increasingly expensive. Governments for a time can put their own money in to replace that wholesale money, but it does little to change the fundamentals. Savings and lending need to be balanced better over the longer term, just as exports and imports do.
We now have a working banking system again thanks to the bailout, but the rest of the finanicial system would appear to be in difficulty as well. Government seems reluctant to engage in discussions with insurers and pension providers or even hedge funds. Properly run unleveraged hedge funds help to reduce the costs that we pay so it is in our interest to see these other areas of finance working as well. Speak to your MP and get some action before it gets out of hand.
By far the most worrying thing is the withdrawal of mutual fund moneys in the US and India. You can see this as the stock markets dip steeply at the end of the day as mutual funds need to sell shares to raise money for the next days withdrawals. Mutual funds being another big source of funding to the wholesale money markets. Remember it was the annoucemnt that a mutual fund in the US has broken the dollar( made a loss) that prompted the quick annoucement of the TARP (US Bailout). It is also worrying that the dollar continues to rise as this must be decimating export manufacturing in the US at a time when internal demand is also tanking.
Less skimming the surface of these issues please Robert and more meat on the bones so to speak.
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#193, well unless he is a fugitive from the law I believe he already pays his "fair share of tax". Maybe he is rather annoyed with what it is being spent on. Lets put it this way, the tax that everyone on this blog will ever pay in their entire lives will probably not match the cost of ID cards. Anyone here think of a better use for THEIR money.
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The reporter is in error if he believes that the problems that the super-rich currently face will make an impact on the rich/poor divide.
Those who have such money will have already amassed monies which will keep them secure from turbulent financial times, it is the normal hard working taxpayer who will bear the burden of a depression.
Since the average wage is supposedly around Ģ30K pa, the vast majority of those who will suffer are ordinary people and many of these under that wage level will lose their jobs and homes.
I believe that the rich poor divide will only grow as a result and the super rich should be more heavily taxed to make up the shortfall, not just because they have more but because it is they who have precipitated this crisis at our expense and are now slinking off with their ill gotten gains virtually scot-free.
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Of all the ideas put forward by Politicians in the last few weeks to help SME?s Cameron?s idea of a ?VAT holiday? is the ?silver bullet? that will help avoid a winter massacre of hundreds of thousands of jobs.
It?s simplicity and immediacy is it?s strength as it effectively gives an SME an instant overdraught and thus instant liquidity.
Cameron backed Brown over the banks. Now Brown must back Cameron over this idea which must be implemented by the end of the month.
Many businesses just do not have the time to wait for the ?trickle-down? benefits of huge Government construction projects.
If this scheme had been in place since the beginning of the year then I for one would have been able to save my one member of staff from redundancy. In fact if it is brought in then I could bring forward my planned recruitment.
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#138, of course I could have written this!!!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVUE96d.HKyw
PS for those with large number blindness 80million USD is a mickey mouse hedge fund. Hope he never needs to get back in the business!
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215 iwanttoscream
All the signs are that the government will do what it can to stablise the housing market and try to give it uplift. The opinion in the US and here in the UK appears to be that economic recovery will not occur until the housing market recovers. Whether trying to uplift the housing market is the right action or not that appears to be the strategy. Some senarios forecast continued slide without apparent end without intervention. It remains to be seen if it can be made to work. Wishing for 2007 lending levels seems a bit hopeful. There is apparently no escape from the importance of the housing market in the UK economy.
220 peterskitchen
I think there will be pressure on the banks to lend and debt will be used to reinflate the economy. The banks do not exist without selling debt and will lend if they think they will get their money back. The government wants spending to resume and borrowed money adds to the flow.
We are not masters of our destiny, no man is an island.
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221 that a great idea and would work in a marxist system but any mention of marx causes the americans to see red.
marx had many good ideas and sadly they were missused by communists and are now related to evil regiems.
if every one was to have the same income and global prices set to even out the costs stock markets would become void and have no option but to cease trading.
the world would progress forward and humanity would improove, but greed and avarice will always raise its ugly head and corrupt any good plans.
to be frank humans are not the cleverest of animal and there lack of control will be there doom.
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Isn't this interesting? It seems to back up an iron law of life (never mind economics) that goes: if you're rich - even in a downturn you'll have great life chances compared to the rest of us - and good luck to you; if you're at the bottom/ lumpen end - you'll help from the state (which as long as it's fair I don't have a problem with); but if you're in the middle -- in work, paying your bills on time, not getting into debt, prudent, thrifty, doing the right thing financially -- and in all probability one of life's good eggs - never involved in crime, a good example to your kids, don't take drugs, an upstanding member of the community -- YOU WILL BE HAMMERED.
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227
Yes there could well be 2 million unemployed by Christmas, that is a fact, do you really want someone saying that 'Oh yes, your jobs are safe, go out and spend - better still, put it all on the credit cards', were have we heard that sort of 'forecasting recently only to find the bank being nationalised two weeks later?!
As post 226 says, if you don't want to read or hear the gritty truth than you can ignore the facts but please don't expect the rest of us to.
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And as we see the start to rebuild social foundation has commenced with the announcement of 'help to prevent the repossessed'.
This is not just a political announcement to save the Labour heartlands in the north from the coming tide of homeless, desperate people, but support to the Tory southlands that cannot escape the reality that house prices are going to drop to a point that will see people just hand in their keys.
They cannot support to the extent they did in the 90's where my mortgage that leapt from 560 per month to 1300 per month was paid for by the government for 13 months.
You will see the government introduce a buy back system, offering auction rates for properties taken back or about to be taken back from the Banks - nationalisation of the Banks helps sway the decision.
The Government then become the national landlord. The protected vote the Government back in
Politically it will keep them in power if undertaken quickly.
A policy that will be unveiled soon(i have to say in my opinion) and you heard it here first
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#229
True, he might well only paying what he can get away with and not his fair share...
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230
Hmm, looking in the Job adverts, very few pay as much as 30k a year.
And those are generally the high faluting jobs!
I think most ordinary people regard themselves lucky to take home 20k a year.
With this recession folks may think themselves lucky to have any job at all.
Still it does not give the Gov't the right to treat ordinary bank clerks and public servants with disrespect.
Its easy to do a pay freeze on the Public sector, but it damages the economy to do so.
And it damages services when contempt is shown for ordinary working people in that way.
And it is easy to close Banks or merge them .
Very hard indeed to open a new Bank and almost impossible to replace the lost jobs.
I just hope this Gov't actually has some kind of plan, and is not just obsessed with inappropriate dogma.
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Perhaps there should be a Petition to keep local Bank branches open ?
B and B in particular!
Yes I am being partial.
If your reading this and you have not checked your Pension plan, it is time to do so.
You may be shocked at how much it has been reduced by all these Nationalizations and shortselling conspiracies.
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237 peterskitchen
Might be, but they will try the indirect route of trying to talk the market up and pushing the banks to lend, thats all cheaper. I dont think the motivation is to help people, it is to stop repro houses being dumped on the market supressing the prices more and affecting economic pick up which they want before the next election
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At 2:00pm on 19 Oct 2008, glanafon wrote:
'I think there will be pressure on the banks to lend and debt will be used to reinflate the economy'
Well of course there will - its the only way FRL is able to stay afloat. However, in order to lend fake money you need to ensure the interest is paid to ensure further lending and repay the hot air debt to wipe the original debt off the books.
So what are the chances of YOUR bank lending you 95% on an asset that is depreciating and will continue to depreciate until the average price of that asset falls from currently 178k to that of 105 k (3.5 average earnings)? How many people have 20/30k deposits - how mwny people are saving?
In the coming weeks people are going to get their new utility bills in. I dont think you understand the extent of what is about hit everyone.
It aint gonna happen- people are unable to continue to borrow at the rate the banks need to sustain themselves - together with more and more people having to raid their meagre war chests to pay for the newly inflated bills having seen the value of those chests deflate by 7% this year.
Borrow to 2007 rates again - yes and Dollar Bill promises to pay the bearer in gold again - i dont think so
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#218 stevewo
Thank you for thanking me for my 'thoughts'.
My 'thoughts' as you put it, are I believe a reasonable summary statement of Company Law.
You wrote:
Many people believe that the banks "concealed" their knowledge of massive sub-prime losses Well, do the 'many people' have any evidence that will hold up in court? If so why have they not shown this evidence to the police, or are you saying the the police and the SFO are deliberately refusing to act on evidence received?
you also wrote:
THEY KNEW MASSIVE FAILURE WAS COMING? Do you have evidence that the accusation that you are making is true? If you do not, there are the laws of libel and I would be quite sure of my facts if I were you!
you also wrote:
Concealing that knowledge, under company law, must be a CRIMINAL OFFENCE. 'Must' it be - if so under which section of the companies acts?
Whilst we all 'feel' that any competent company director ought to have seen these things coming there is the world of difference between this and the ability to reasonable expect to secure a successful prosecution under the law.
I would like to see that matters investigated as I find what the banks and financial institutions have achieved as a totally unacceptable face of capitalism, but I would grant to the bank manager the same rights under law I would expect myself. Whilst one's moral outrage persuades one, quite reasonably' to want to blame someone it is generally not sufficient to secure a criminal prosecution, let alone a successful one.
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what we need is a price freeze,6 months,a year;that way the working taxpayer does`nt start paying off this fiasco too soon.I personally,lost no money,life savings etc,why?because my Ģ25000 went on paying the endowment shortfall, i could`nt prove i had been turned over.So,for all those who knew the risks of stocks and shares(bandwagon jumpers)welcome to the real world or maybe not.The government will put its hand in our pockets for you.Bitter,not me,i`m 68 and still working full time.Ho Hum
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"221 that a great idea and would work in a marxist system but any mention of marx causes the americans to see red."
Haha, very nice!
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John_From_Hendon #211
I wasn't talking about the voters being irrational. I was talking about the politicians and economists. You would have it that on the spur of the moment, a few people ignored prudence and took misguided steps inadvertently not realizing what the long term consequences would be. It didn't happen that way at all. Before Congress passes a bill and while it is being drawn up and considered, The committees having expertise in the relevant subject in both the House and Senate hold hearings calling on expert testimony including from the Federal Reserve and Treasury departments. This included Greenspan, Bernanke, and Paulson. President Clinton had access to the same expert advice and frequenly got it. You are forgetting that the great depression has been the most studied economic event in history, at least in American history. Bernanke (or was it Paulson) even wrote his PHD thesis on it. The causes, effects, and remedies were analyzed to death for almost 80 years including using the most sophisticated computer modeling before these disasterous decisions were made. Remember, the keepers of the gates at Treasury and the Fed didn't merely acquiesce to removing these regulations, they advocated it when they should have been recommending extending and strengthening them. This is because as Gertler said in the BBC interview, many new types of institutions functioned as banks but were not regulated the way banks were. These experts from Treasury and the Fed have no political agendas, at least they aren't supposed to. They are paid for their objective professional opinions. They are acknowledged as the leading experts in their field in the world. Yet they blundered catastrophically. But it didn't end there, Bemanke and Paulson told Congress that if they didn't pass the legislation that was first proposed, the sky would fall the next day. Yet it didn't and what did pass was quite different from what they insisted was the only plan that would work.
It is true that some did see trouble ahead but none were shouting it from the ramparts the way you would hear about global warming for instance. They evidently didn't see the enormous impact all this would have. Yet it wasn't that long ago that we had a similar crisis with derivatives. Remember that? These were the highly complex instruments which few people understood that were sold to many financial institutions and resulted in chaos. Banks went broke, large corporations were devastated, the Orange County California pension fund lost a billion dollars under the stewardship of the financial wizard Robert Citron who suddenly said he'd been a babe in the woods and had been duped (they sued Merrill Lynch, don't know if it's still in the courts or how it came out.) Yet these too went unregulated and now there are more of them than ever.
BTW, in the US we do not build houses on flood plains anymore, haven't for many decades. You can't get a building permit approved to build on one and those already built are hard to sell even in good times for residential real estate. Will we remove those restrictions too for short term profits?
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Anyone having had the humiliating experience of having to sign on at a Job Centre recently will have found a bunch of young demoralised people on low incomes themselves trying to advise professional people on how to find a job.
The majority of these 600000 jobs this government keeps quoting are commission only sales jobs that no one in their right mind wants to take.
It is a sole destroying place to be for those doing the job and those seeking a job.
Unfortunately it is the only route through for those needing benefits under tough circumstances and a reality check for those who've never had to experience it before.
You know you're really on your own when you come out of such a depressing place.
There are those forced onto benefit through no fault of their own and those that choose benefits as a life style. Can I assume that a lot of those derisory statements against those who have to seek benefit as a temporary measure come from those who are in what they think are nice safe public sector jobs?
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242 peterskitchen
I dont disagree with you. I know about 90s just like you. I'm just saying what they are most likely to try and do, not whether it will work or not.
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247 virtual silver
Good on you girl. Good Luck
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gods_idiot (#197):
Good point. Also striking to me personally because as I had penned (#188)
the words that came unbidden to me were "This explains all those addiction problems. We became addicted to credit. Even worse, we're addicted to envy." I hadn't been thinking about addiction at all - or so I thought. I think it was the pain of letting go of the ideal of a "fairer society" that is in reality one more comfortable for me and those around me ... that I think was the pain that triggered it!
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MarcusAureliusII (#246)
It was Bernanke. Here's what he said in 2002 at a celebration of the 90th birthday of Milton Friedman
Sadly Friedman in fact only lived another four years. Here's hoping Bernanke's other encouraging statement - "we don't do it again" - turns out to be more accurate and long-lasting than that one.
There is a serious divergence, on the libertarian right, between two economic scholars who wrote histories of the 30s depression - or at least included it as a major theme within other landmark works. Milton Friedman vs Murray Rothbard. I'm not expert enough to feel that I can referee that one.
What's really interesting is the real world can now be seen as a massive experiment where someone greatly influenced by Friedman, who has politely rejected the strictures of Congressman Ron Paul in the banking committee (Paul following Rothbard to the extent of having a picture of him up in his office), tries indeed to make good on his promise of 2002.
Feeling happy to be the guinea pigs, everyone?
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#246. MarcusAureliusII
I wasn't talking about the voters being irrational. I was talking about the politicians and economists.
Politicians and economists are constrained through democracy by the voters, at least they are in most of Europe.
Even if politicians and economists 'saw' what was coming if the 'solution' involved a short therm cost to the voters they (the politicians) would not get elected to implement any policies at all.
It is perhaps possible to blame opposition parties for not supporting taking rational steps toward fixing a foreseen problem (that has short term costs e.g putting up interest rates) or remaining in opposition, but that is hardly likely is it?
I think that when the dust has settled the low interest rates policy on both sides of the Atlantic will be seen as a major contributory factor to the present problems. I ask you do you think it is probable that a party that had in its manifesto to raise interest rates would have been elected? I therefore think it is not rational of you to absolve the people from having some causal like with the present problem (and indeed the democratic system).
And while we are on about so called academic 'experts' some random thoughts from my memory on Milton Friedman - contributed to the destruction of democracy in Chile (the 'boys from Chicago' episode) and was a major justifying influence behind Margaret Thatcher's libertarian direction in and regulation reduction that can I think be reasonable cites as a major contributory factor behind the credit crunch. It is a pity he is dead and cannot be held to account fro his disastrous views - but perhaps he is suffering in another place before a higher court!
If any single man can be 'credited' with this credit crunch he can be - in my opinion the man was a global disaster. In my opinion recent events have proved beyond doubt that the economic ideas of Milton Friedman are rubbish and damaging in the extreme.
[P.S. on Milton Friedman:
Even if you ignore the huge detriment to democracy that he almost single handedly managed in South America. (I recommend Salvador Allende's book 'Chile's Road to Socialism' if you can get a copy.)
]
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I am not sure I agree with this analysis. The over supply of credit in the last 10 years has led to the increase in the value of assets (most obviously homes). This has benefited the most wealthy. Many of the most wealthy have sold their assets and banked this increase (or downsized their houses and used the difference as a pension). Unfortunately this increase in asset value has been at the expense of those trying to buy - e.g. the first time buyers - fooled by easy credit, who are now having to pay it back - and will have to for most of their lives because of their large mortgages.
However a further problem now is the bank bail out has to be funded by the taxpayer and this will have to be met by the middle classes and particularly the younger middle class.
Also remember the ultra rich can afford to lose almost everything - and still be much richer than the rest of us.
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252 john from hendon
I'm not trying to be peverse but you do not really think politicans after being elected do what they say they are going to do before they are elected do you. So they can actually do what they want up to a point, particularly with a majority. And whilst a proportion of the electorate may be only too willing to swallow the feelgood yarn they are fed they can only cast a vote once every 4 years or so. Between elections it is up to the government to govern. In that time they are only constrained by the desire to be re elected, I would hardly call that constrained by democracy. Further it is hardly revolutionary to suggest that approaching an election attempts to give the economy an upward lift occur, by politicans. The problem with economists is to all intents and purposes they only use history and bar the odd event such as the depression they build models which work in narrow bands so by definition their models do not work in extreme circumstances, there is not the statistically sound data to test them. That, it would appear, is accepted on the stock exchange where trading is stopped in extreme conditions to stop mathematical models driving a downward spiral of selling. (It is not my field so correct if I am wrong). I certainly do not feel the electorate are the main culprit in this mess.
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And when politics follows satire:
http://www.theonion.com/content/news/recession_plagued_nation_demands
Thank God we've found were Brown is getting his political advice from!
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#238, his fair share is what he can "get away with". Unless of course you are the type of person who regulars pays more than he needs to....
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#254 glanafon
but you do not really think politicians after being elected do what they say they are going to do before they are elected etc..
Firstly: You go on to say that elections happen every four (or indeed five) years - that may be true for Westminster, but there are very many more elections for councils and Europe and so on. In fact the poll ratings and results actually matter far more frequently than once every four years.
Secondly: I think it is also possible to be reasonably well supported by the results of elections since the war that when a party in power does the opposite of what it told the electors - they are punished at the next election. I am also of the opinion that with the advent of rolling news and 24hs a day coverage - the public are far more aware of deviations from the manifesto.
Thirdly: I am not aware that any party anywhere has been elected on the basis of a promise to make the people poorer for the benefit of the economy in the medium term. (Still less for the benefit of bankers!)
For these reasons I believe that it is exceedingly unlikely that politicians will constrain the economy for the long or medium term benefit. (Similarly in the matter of Air Travel and the green agenda.)
On economists:
I have to agree with you here - 'economic science' is an oxymoron. As a group they tend to reduce the exceedingly complex and chaotic to the mundane and produce inaccurate simplistic certainties.
One thing that Milton Friedman was quite often changed with was that he was statist and dictatorial - now that IS the way to RUN an economy - but we live in a democracy and I feel confident that you are not advocating anything else.
Do we get the government we deserve and vote for? Unlike (hanging chad) USA we tend to get the party we vote for in the UK and Europe (or at least the few swing voters vote for!)
I don't think we can entirely absolve the electorate from responsibility, however it has to be shared with the institutions (the good and the great) - lets us pick a scapegoat or five. Let's see: Bankers, Regulators, Treasury Civil Servants, Government Ministers, Politicians in General (both in and out of government - why was the opposition not making a fuss?), the Church of England, Oh and of course foreign versions of the same. If any can be proved to have broken the law then they should suffer the consequences, but I do not hold with lynchings, unless arms are taken up by the state against the people!
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#255 is good but reminds me of a hilarious pre-crunch Onion special I ended up enjoying after benagyerek pointed out the "Rich and Super-Rich" spoof in #28:
"Beyonce Unhurt After Stray Bullet Miraculously Hits Passerby
Tragedy was narrowly averted when a stray bullet bound for singer Beyonce thankfully struck and became lodged in a passerby."
http://www.youtube.com/watch?v=L_U1oS0RoGA
Bryan Appleyard's been arguing in his blog in the last week - as well as having lunch with Nassim "Black Swan" Taleb - that with the downturn will surely come just a bit more reality and common sense to "celebrity culture" and all that. But great satire can only help
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Come along, Robert, couldn't you post something else for those people who are currently 'hanging on the telephone for I N G to answer to be reading in the meantime ??
One wonders if you may be able to supply answers to these exciting questions ?
1/ Whether UK consumers would be better going to Reading or Cardiff in the event that their website goes down ??
2/ Where is their website 'based' anyway, so that customers can keep appraised of the power supply infrastructure of the relevant country...
3/ The most obvious question is why on earth would somebody give up at least the token 'security blanket' of an actual branch network based in the UK for the possibly illusory benefit of a little bit of additional interest on their money...
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#256
You really are clueless, go and buy a dictionary and look up the meaning of "Fairness", are you seriously saying that it is correct that a multi millionaire should pay less tax that the cleaner he employs - if you do, perhaps you should also look up the meaning of the word "Morality"...
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John_from_Hendon #252
I nearly fell on the floor laughing at your post.
"Politicians and economists are constrained through democracy by the voters, at least they are in most of Europe."
So the people of the UK are perfectly happy that their sovereignty was given away to the EU even after they only voted to join a trade pact and they don't really care that they don't have to be bothered to vote again on such trivial matters as whether or not to approve the Constitution, Lisbon, or even staying in the EU for that matter. They are perfectly happy to let Tony Blair and Gordon Brown decide that for them.
And the people of France are only too happy that having voted down the Constitutuion they weren't asked again to vote for or against Lisbon, they were happy to let Sarkozy decide that for them.
And people in the EU were only too happy that the EU's books haven't been certified by accountants for over ten years or that the entire parliament goes on a perpetual junket from Brussels to Strasbourg sampling the finest wines and cuisines and staying at the most luxurious hotels at their expense. After all the EU is a democracy where the politicians accede to the will of the people as you said.
"Even if politicians and economists 'saw' what was coming if the 'solution' involved a short therm cost to the voters they (the politicians) would not get elected to implement any policies at all."
So voters are only interested in short term consequences of what happens. As long as they get what they want for the moment, they don't care if doom is down the road. I guess that's because they are just plain stupid. But then why should they worry about global warming when that won't really have any effect for several decades?
"It is perhaps possible to blame opposition parties for not supporting taking rational steps toward fixing a foreseen problem (that has short term costs e.g putting up interest rates) or remaining in opposition, but that is hardly likely is it?"
You mean they saw it coming but did nothing about it? I guess they felt they lost the previous election for being too responsible. Their strategy was to shut up and prove they were just as irresponsible as the incumbents so as to have a better chance to win next time around.
"I think that when the dust has settled the low interest rates policy on both sides of the Atlantic will be seen as a major contributory factor to the present problems."
I clearly don' agree. It wasn't the rate that did the system in, it was lending large sums of money to people who could not afford to pay it back. That is not the same thing.
"I ask you do you think it is probable that a party that had in its manifesto to raise interest rates would have been elected? I therefore think it is not rational of you to absolve the people from having some causal like with the present problem (and indeed the democratic system)."
Short term interest rates are set by a centeral bank whether it's the Federal Reserve in the US, the Central bank of the UK, or the European Central Bank for the Euroland economies. Long term rates are set by the markets. People entrusted with running central banks are supposed to be chosen based on their immunity to politics.
"And while we are on about so called academic 'experts' some random thoughts from my memory on Milton Friedman - contributed to the destruction of democracy in Chile (the 'boys from Chicago' episode) and was a major justifying influence behind Margaret Thatcher's libertarian direction in and regulation reduction that can I think be reasonable cites as a major contributory factor behind the credit crunch. It is a pity he is dead and cannot be held to account fro his disastrous views - but perhaps he is suffering in another place before a higher court!"
"If any single man can be 'credited' with this credit crunch he can be - in my opinion the man was a global disaster. In my opinion recent events have proved beyond doubt that the economic ideas of Milton Friedman are rubbish and damaging in the extreme."
I don't recall Milton Friedman ever having been in a position of government where he decided what course of action would be taken. And I don't ever recall him suggesting that banks or other lending institutions lend any money, let alone trillions to people who would not likely be able to pay it back. Nor guaranteeing that the people who structured such loans should be given a guarantee by another investment instrument, a Credit Default Swap that they would be able to pay back those loans.
"[P.S. on Milton Friedman:
Even if you ignore the huge detriment to democracy that he almost single handedly managed in South America. (I recommend Salvador Allende's book 'Chile's Road to Socialism' if you can get a copy.)
]"
Why not aske the people in Eastern Europe about the road to socialism. They'd probably tell you that a more accurate title would have been The Road to Ruin.
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253 Earth Thinking
The lot of the young worker, particularly the young knowledge worker, does not look terrible good does it, I have to agree. The objective of getting approximately half of schoolleavers through uni is a good one but they all now come out carrying a very large bag of debt. Houses even at this stage, rented or bought, remain expensive. Taxation, direct and indirect, is high. In many locations there is not much choice about running a car. If the figures work it is not with a great deal of comfort. I can see some leaving, and as usual it is likely to be the best who go elsewhere. It is difficult to see how this sort of environment can be made more hospitable to the young without upsetting some. It is easier to get to this point than move away. It is probably easier for the young to go than stay. Meanwhile we receive the message all the time that there is a shortage of the right sort of skilled workers. We seem to have lost the plot.
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"252. At 5:42pm on 19 Oct 2008, John_from_Hendon wrote:
If any single man can be 'credited' with this credit crunch he can be - in my opinion the man was a global disaster. In my opinion recent events have proved beyond doubt that the economic ideas of Milton Friedman are rubbish and damaging in the extreme."
What utter rubbish.
The problem is credit itself. Under our current banking system, credit causes inflation, which must then collapse. The only thing you can do about it is change the timing and magnitude of the collapse. The longer you postpone it, the bigger the collapse will be.
It's been well documented for close to a century and has nothing to do with Friedman, Keynes or any other economist. It is simply fundamental to the nature of our money.
Reform of the monetary system is one of the most important subjects there is. Particularly since in a few years it is going to be clear to everyone that all of our "growth" has been based on increasing abundant energy supplies, which by that time will be decreasing, not increasing.
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Dear Robert,
You called it a financial Armageddon. Well maybe your just right.good v evil. or lets just say for now right v wrong.
Its was some 2000 years ago that it was written that the meek shall inherit the earth. So who are the meek? certianly not those who are likely to lead battalions of amry troops.The meek are people who are active when it comes to caring for the weak poor and oppressed.
Maybe when it was written all them years ago he knew that greed would be our downfall. And if that is so then all the worlds leaders actions no matter what will be invien.
paslm37 verses 10-11
In just a little while the wicked will be no more..... but the meek shall inherit the earth and delight themsleves in abundant peace.
pugwash i hear you say, but lets face it who on earth would of ever thought that the biggest financial institution in the world would of collapsed
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true-liberal (#263), a couple of questions for you:
1. You say that 'all our growth has been based on increasing(ly) abundant energy supplies'. So has none of our growth since WWII been due to technology (like the computers we're both using and the Internet we're communicating over) - making us more productive and efficient?
2. Have you come across Professor Antal Fekete and his proposal of a gold standard with expansion of credit strictly limited to "short-term, self-liquidating credit ? specifically, bills of exchange payable in gold coin in 91 days or less". Fractionally fractional reserve banking I suppose you could call it. People like Nelson Hultberg are arguing that this is how the British Empire promoted such an effective (and peaceful) increase in world trade from 1815 through 1914. It sounds the closest thing I've read to a viable proposal for a return to sound money. Any thoughts?
Thanks by the way for the moderate tone of your contributions in what often seems to be a highly emotive area.
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#117 - You misinterpret the relevance of international history.
There have been plenty of nutters down the ages and lots of people have been killed in lots of places.
The point is not in seeking some kind of numerical death balance as between the eviltude (sic) of the DPRK and Chile. The point is to recognise that the DPRK is a bananas regime, and then to ask exactly what was wrong with Salvador Allende, Daniel Ortega and others?
They didnīt want to kill or starve their own population, or invade other countries - so what is the problem with people like this?
They think differently, so what? Does that justify overthrowing them, and what were they overthrown for?
On to Thatcher - she is clearly involved in all of this since she instituted the deregulation process that has led to where we are today. People like John Eatwell have been writing about the regulatory problem for years.
All that have followed Thatcher have essentially followed her policies - just not the bits that they dont like, like stamping out asset price bubbles at an early stage. The point is you cannot have an effective regulatory system that relies on the whims or moral fortitude of one particular ruling clique. Neither can you have a regulatory regime that relies upon market participants behaving as "Officers and Gentlemen" - they wonīt as they are paid a great deal of money to find lawful ways around regulation.
Perhaps more ominously Thatcher was responsible for destroying the civil industrial base of the UK. At the time that was fine as she led everyone to the commanding new heights of the service economy. The problem is that most financial services are now being revealed as little more than a giant ponzi scheme, and financial pressures will mean that people will soon work out that they have no need for a lot of the other services.
Back to Allende - people like that were overthrown as a demonstration of power - do it our way or donīt do it at all. The guys that didnīt fancy fronting up learned the lesson and started doing it "our" way. Now, as you yourself identify, there are equally insane bubbles in the middle and far east - so they wonīt be riding to the rescue. The places that wouldnīt see it "our" way are now basket cases - so they wonīt be riding to the rescue either.
So please tell me - how do we extricate ourselves from this mess? a mess that weīve spent 30 years digging ourselves into.
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Well Robert, I hoe you have enjoyed a weekend off.
A couple of unrelated thoughts on "a fairer society"
Firstly, in this globalised world, all of us in the UK should remember that our still high standard of living is subsidised by by the Asian wage slaves who work long hours for a pittance, making much of our clothing and other manufactured goods.
Secondly, in an interview with Andrew Marr, Sir Brian Pitman, ex Lloyds-TSB CE says it was "totally unrealistic" to think that executive pay could be capped. He said "If you cap pay in the UK, where are the brains going to to go? Where is the enterprise going to come from?"
"We've got to get back to a situation where the markets drive these things..."
The problem with executive pay is a global one: incestuous relationships between remuneration committees throughout the developed world mean that the market is rigged in favour of the corporate elite who run big companies for their own benefit. (Whilst they pretend that they are servants of the shareholders.)
Actually, these thoughts aren't as unrelated as I first thought. If we really wish to encourage "fairness", isn't it a global problem?
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Surely it is all relative, therefore irrelevant.
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54. Can't agree moraymint. It is not reward for effort that rules under capitalism it is reward for exploitation that really takes place.
Little wonder we lurch along as we do with all the varying comments and opinions here. The roots of this crisis go back to Thatcher and the council house sale policy. It created the absurd notion that everyone under a capitalist system should be able to afford their own home. Some benefitted at the expense of their children who now struggle to find truly affordable property. It enticed/forced people who could never afford it to saddle themselves with unpayable debt based on continual inflation of property prices, and has been continued by the non-Socialist "New Labour" party, and the resultant bubble passed off as some sort of wealth creation. The US then followed a similar route even more rapaciously and, "Hey Presto!", we are now at where we are today. Even now people talk of a house price recovery as if the inflated values are the norm. No lessons learnt.
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#261 MarcusAureliusII
You don't think that government is in anyway constrained by the electorate? You are therefore denying democracy's fundamental system of control and espousing dictatorship, that simply fools the people to keep it in power. Do you not value democracy at all? Do you have no belief in your constitution at all? Are you so cynical that you are willing to deny all of your fellow citizens their right to vote for what they want? Are you also saying that your fellow Americans are so 'wise' that they will vote against their best interests? It does seem so from your comments. Think about what you are saying.
Read your history books if you do not recall the way in which Milton Friedman's words and view influenced both Margaret Thatcher and Ronald Regan. He was lionised. His supplied the economic and philosophical basis for their radical policy shift away from any attempt to regulate.
Like most things neocon your position of unquestioning libertarian support for the people who got us into this state are rapidly going out of fashion.
Also please do some research on the history of Chile before you comment on the historic events.
#263 true-liberal
Sorry but I do not agree with your view that low interest rates were not that cause of the credit crunch.
Let me examine your understanding: Will you agree that when you reduce the price more people buy the good and you also need to sell more of the product to maintain the same level of, or increase profit (as the margin tends to reduce due to the oversupply of the product i.e. money) - the price of money was kept too low and hence credit expanded as there was no other mechanism to control its supply.
Banks need to sell more money to maintain their ever increasing desire for profit. They found that they could create ever more synthetic money through synthetic financial instruments. But to sell all of this extra credit they needed to keep its price low and even lower its price. This works so long as people can repay the debts however NINJA and Liar Loans tend to grow exponentially as the true demand for debt that can be responsibly borrowed is limited and probably self limiting. However with ever lower interest rates and absurd multiples of incomes and self-certified loans things can carry on for a while until the train hits the buffers.
Increased credit is a direct consequence of (too) low interest rates in a market without any other constraint.
Also in your argument that credit causes inflation - where is the inflation? Asset price inflation has occurred. Now if the price of money was (had been) at a sensible level (higher) then the value of the assets could have been kept under control. I argue that excessively low interest rates cause the credit bubble that collapses though the now well understood mechanisms that we have seen this year.
One of the most appalling errors of economic management of the last decades has been ignoring house price inflation. Many many people have written about this problem but the mechanisms of the state ignore them for the political argument that when house prices go up people feel richer in the short term was unassailable, but wrong ion the medium term.
So I identify two major errors that substantially contributed to the credit crunch. Interest rates being kept too low for far too long and not including house price inflation in the statistics.
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There is someone doing rather well out of the credit crunch chaos - Robert Preston himself
To be fair few weeks ago I would have said Robert who ????
Now he is becoming a house hold name.
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Its now strange to think that banks once gave % 120 loans to the self certified, to bid up the price of loonyland in order to maintain the appearance of bank solvency[positive assets/debt relationship ] ...... keeping their AAAcountants and reamortising debtors in happy valley.
Is it a coincidence that the conservatives shut down the loonatic asylums at the begining of the housing bubble ,knowing foolwell that soonerr or laterr the delusional insane dispossessed would have to apply for a roof over their heads [after the park benches were taken away]and could be relied upon to spin out the mother of all credit[bonus] bubbles for three or four years longer than would otherwise have been the case, with the help of self certified loony tune loans [benchmarket lier loans]
Many home owning negative equity proxymorons who purchased overpriced leasehold flats, may now find themselves in breach of that quaint but prescient covenant stipulating that the property should not be used to house the dilusional insane.
Banking was a fools pair o dice
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#266, absolutely wrong.
The fact is that hard-core leftwing regime have ALL resulted in repression. The DPRK isn't a "bannas" regime anymore than Mao, Stalin or Pol Pot. They are simply the final destination for communism.
The problem ISN'T deregulation it is REGULATION. Finance is one of the most highly regulated industries in the world. These structured products only exist as a form of regulatory arbitrage. Why is this so hard to understand?
Also asset bubbles are part and parcel of a free market. People get greedy, underprice risk, get fearful and overprice. This is what you pay for the growth that comes with a free-market, the freedom for people to make idiotic investments. The government's job is to ensure people don't get too leveraged so when the inevitable crash happens the good all get taken down with the bad. Thatcher and later Major DID THIS - remember the NuLab claim about 15% interest rates, remember the short, shallow recession. Brown's cure for a coming hangover is to encourage people to get drunk again.
I think you sort of recognise the problem:
"Neither can you have a regulatory regime that relies upon market participants behaving as "Officers and Gentlemen" - they won?t as they are paid a great deal of money to find lawful ways around regulation."
but your solution is what? More regulation? More "regulatory system that relies on the whims or moral fortitude of one particular ruling clique" - ie the government?
The UK "industrial base" was mostly worthless that's why it withered when exposed to the glare of competition. I have lived in countries who have a "healthy" industrial base and I think you rather live in a country who main businesses make a 30+ margin than one who make 3% on a good day.
Most of the financial services companies are perfectly healthy with perfectly healthy cashflow - far, far healthier than ye good olde manufacturing companies that has been in recession for the last few years.
The point about a recession is not that it is "bad" but it is what unfortunately this country needs to have to recover from the asset bubble inflated by the insane policies of Brown and to rebuild the balance sheet after the crazy spending spree Brown went on the last 8 years.
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Having witness what Gov't help means to the Banks, ie nationalization and massive shareholder losses.
Are we about to see nationalization of the building companies ?
That is the Gov't taking over their Housing developments for next to nothing and winding up the companies?
Or forcing them to merge?
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#273
re left wing dictatorships:
So Chile was a left wind dictatorship was it?! Black sheep, your are twisting history again, but of course by the time that dictator was ousted you had only just started school so all you know is what you have been told...
re the pre Thatcher UK industrial base:
Of course you know all about that era, living through it as you didn't, there were many countries that had similar problems but only in the UK did the government make a decision not support it's home grown industries - unlike EU member states like France, Germany or Spain for example never mind countries such as China...
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#273
when you remark that:
"The point about a recession is not that it is "bad" but it is what unfortunately this country needs to have to recover from the asset bubble inflated by the insane policies of Brown and to rebuild the balance sheet after the crazy spending spree Brown went on the last 8 years..."
How about you declare the extent to which you personally will be exposed to the effects of this recession. I figure you won't be touched by it.
Your remarks sound like hubris to me. It is the last thing hard-working British people need, because they stand to be punished by Britains medieval and punitive legal systems that cause them to lose everything they have worked for (in let's face it a world that gets harder every day).
Never before has so much been owed by so many to so few..
Some MAJOR and Banks who themselves (by every admission) have plunged themselves headlong into financial chaos get DIRECT government intervention and financial assistance on an Olympian scale.
The British people working every day and doing their best - what do they get? A government - according to Mandleson interviewed on the Politics Show Sunday - unable to intervene and stop the financial institutions rolling up the carpet on those least able to defend themselves.
No, this recession is not a good thing. It is a very bad thing indeed. It will turn Britain (I mean UK & NI really) into a nation of homeless, unemployed bankrupts.
Why is our Parliament not acting for its people? This affair is a shameful reflection on democracy. This is a time to THINK BIG.
GC
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#273
It isn't hard to understand, if that's the way you come to the evidence, as I do too. But we need to face that there is a "dialogue of the deaf" going on in the UK with this kind of thing. Critics of 'unregulated capitalism' see the current fright as their chance to score some major points. But in doing so they're playing into the hands of the power-hungry, not the poor. And that is where the paradoxes of our very mixed-up 'mixed economy' come into play with full force.
For instance, the Federal Reserve in the US has begun to buy up commercial paper to help companies that can't get loans. Sounds great, government intervention at its best, right? But it isn't done directly, it's all done through a single company that's been awarded the contract, called PIMCO. In all the furor about 'fat cat' bankers this little outfit is making an absolute killing. But don't worry, the CEO Bill Grossman when he appears on TV seems to support socialism - or at least all kinds of government intervention in the economy. Wouldn't you just, if you were in his shoes? His firm is reported to have made 8 billion dollars in just one Monday recently.
Now ask yourself: how much have you heard about PIMCO compared to, say, the greed of Dick Fuld of Lehman Brothers and other has-been bankers? Not much, I take it. That's where the smart operators are, in the shadows, relying on our outrage and our envy to blind us from much more dodgy things - systemically dodgy you might call it, because as blacksheep says, they ultimate lead to repression - that are being set up under our noses, all in the name of 'sorting out the problem'.
One reason I respect Ron Paul as I do is that nobody cute like PIMCO can buy the guy. He doesn't necessarily get everything right. But it's extremely striking to read how he predicted not just the crunch but the bogus 'lessons' about increased regulation that would follow. This is from March last year:
He goes on to blame the Fed, as usual. But this guy also exposed, back in 2002, the distortions caused by Clinton's over-regulation of the mortgage market, through extending things like the Community Reinvestment Act. He got everything else right about the crisis - so I'm inclined to listen to him carefully on the sound money front too. But in that area I'm leaning away from Rothbard to Professor Fekete. (Help, anyone?!)
I'll finish up then with a positive word about Gordon Brown (just so that blacksheep like everyone else has something to disagree with). Although the talk of 'end to boom and bust' was ridiculous and I agree he's now got major egg on his face I do trust something about that gloomy Presbyterian upbringing that smarmy outfits like PIMCO and the rest may not be able to pull too many fast ones over the guy. As world leaders come together to decide our future - and the stock of Brown in that kind of arena seems to be high - we can perhaps live in hope.
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I don't begrudge the poorest getting a little more but of course I do feel a little hard done by because I'm one of the few people who haven't been living beyond their means.
My company has struggled and haven't been able to give me a rise at all this year - no increment and no inflation. I've been sensible all along (I bought an affordable flat when I could probably have borrowed a lot more, I don't have credit cards or loans and I don't buy expensive luxury items) but now I have little to show for it and redundancy is also a possibility.
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Oh thank goodness for that - all our benefit scroungers will be having a bumper Christmas then, more teenagers can get themselves up the duff and start raking in the benefits and a free home and for people like me stuck in the middle - well I've already cut back on food, heating, petrol and have allocated about Ģ10-Ģ15 per Christmas present this year. I work 37.5 hours a week, single parent and trying to get 2 through university - hurrah for me!!
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Why the banking bail-out won't work...
http://uk.youtube.com/watch?v=R528WbVdC0I
The truth is simple. To illustrate, today I closely examined my passport today to discover an RFID tracking chip embedded within (clearly visible too). So what, you may ask? What does this have to do with anything?
Now, understand this: the economic markets are going to implode; the US Federal Reserve is deliberately printing out trillions of dollars to the point where hyper-inflation will render the debt owed by the US treasury as unserviceable (i.e. the entire reserves held by the US federal budget won't be enough to even pay the interest on the loans it owes).
Within 6-12 months, the US dollar will be demonetised. Let me say this again - the US dollar will become worthless. Thousands of trillions will be wiped out within a matter of days, leaving the majority of middle-income and working class citizens in destitution. By the same token, you can expect the pound to follow shortly after.
And remember those anti-terrorist laws we fearfully embraced and welcomed with open arms in the wake of 9/11 and 7/11? Don't even think about complaining to governments, protesting or petitioning for any reforms or legislative support to the millions these resulting actions will leave in poverty. In truth, anti-terrorism legislation will see to that.
Historically, increased centralisation of any government has shown that it comes at the expense of liberty and freedom. Free markets and decentralised government are the solution, not more bureaucracy. Despite what we're being told, we're in fact NOT in a free market economy as it exists today. Instead, our markets are being deliberately leveraged in the interests of a select banking few; understand, that capitalism and trade in a free market economy are the virtues we should be embracing.
A new world economic order is awakening. It is time that people began to wake up, empower their humanity, and reclaim their freedom and civil liberties which are being eroded piece by piece from our corporate-sponsored governments.
We have become complacent for far too long. Get off your asses, stop watching pop idol and all the reality tv garbage, obtain sources of information outside of what the technocrats are feeding you from fox news, cnn, nbc, bbc, tell your friends and family. The information is out there, and they're doing it right in front us. Heed the warning of people such as the 2008 Republican Presidential candidate Dr. Ron Paul (youtube it), google NAFTA, NAU, CFR, the development of the Trilateral Commission...