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The shrinking economy

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Stephanie Flanders | 12:08 UK time, Friday, 24 July 2009

It turns out the UK economy has moved a lot more slowly in the past few months than the surrounding debate. 'Twas ever thus.

People passing sale signs in shop windowsIf the first estimate for growth in the second quarter is right, Britain's national output is still shrinking. And not by a little.

If this were the US, where GDP figures are presented on an annualised basis, we'd be talking about the economy declining at a rate of more than 3.2% in the second quarter. Perhaps it's just as well that we're not. But however you dice it, the 5.6% decline in GDP in 12 months is the worst since these records began in 1955.

Two points of perspective: first, though the 0.8% estimate is clearly at the very low end of independent forecasts, the sheer range of those forecasts in the lead-up to this announcement show quite how hard it is to call the economy right now. Some thought it would be even worse than this. Others were actually expecting a 0.4% rise.

The second point is that, as ever, this number is subject to revision. In the crucial service sector, the ONS only has actual figures up to May. The rest is largely estimated. Coverage of the production sector is better, but even there, the hard numbers often only extend to May.

If we thought the economy was gaining momentum over the course of the past three months, you might expect the figures to be revised up when the second set of figures for the second quarter come out on 28 August. (Or much later - remember it takes up to two years from the end of the quarter for the ONS to get all of the data it needs for the final GDP figure).

Research by economists at Goldman Sachs [see chart below from European Weekly Analyst 09/18 May 14, 2009] has found that later revisions to British GDP numbers are biased upwards - in other words, the ONS seems to err on the side of the under-estimating GDP rather than over-estimating it. They found the same to be true for the Eurozone economies. Whereas American GDP data tends, on average, to get revised down. More proof, perhaps, of Americans' greater optimism - or greater affinity for spin.

European Weekly Analyst Issue No: 09/18 May 14, 2009 Goldman Sachs Global Economics, Commodities and Strategy Research at https://360.gs.com

But it should be said, this research didn't go back far enough to cover GDP estimates during a recession (they didn't think it was worth it, given that they now measure GDP so differently). The revisions when GDP is falling could easily go the other way.

There's no getting round the fact that I said all of this when the first estimate for growth in the first quarter came out. And yes, the figures were revised. But not exactly in the direction the optimists expected. As you'll recall, the number went from minus 1.9 to minus 2.4.

Also, if we think back, the greatest talk of "green shoots" was actually in the first part of the quarter - April and May. If anything, the data for June has gone the other way (notwithstanding yesterday's strong retail sales figures for June).

Where does this news fit into the big picture? I would say that anyone who was worried about the momentum of the recovery before will be that much more concerned now. Not least, because the recovery has yet to actually show its face. With a modest, 0.2-0.3 % decline in the second quarter, you could say that a third quarter recovery was still on track. It could still happen. But the story is a lot harder to spin.

As I said yesterday, the MPC will be looking far beyond the here and now when it makes its decision on quantitative easing next month. Looking back at the May Inflation Report, the MPC appears to have been expecting GDP to fall by 2.9% in the first half of the year. If this figure is right, the decline will instead be 3.2%.

That's not a huge difference. But you'd have to say that this makes a continuation of the policy a little more likely, albeit in a more subdued form. As economists at Barclays Capital have pointed out, senior Bank officials - including one of the deputy governors, Charlie Bean - are on record saying the MPC was expecting a "small" contraction in the second quarter. This isn't small.

And, of course, it makes it that much less likely that the Treasury will hit its forecast for 2009 of a 3.5% decline overall. From where we are now, you would need growth of maybe 1.5% or more in both of the second quarters to make the numbers add up.

The forecasts for the public finances are pegged to a slightly more conservative forecast of a decline on 3.75%. But I'm reliably informed that in preparing the Budget in April, the Treasury civil servants wanted a gloomier forecast, to allow for the possibility of a 2% decline in GDP in the first quarter (they got that initial first quarter estimate, hours after the chancellor sat down).

No 10 had a different view, and in the end, the forecast was for a decline of 3.25-3.75% this year. For a while it looked as though the data were moving the prime minister's way. Not any more.

Update, 27 July: An earlier version of this post mistakenly said the service sector data extended only to April, not May, for which apologies.

Comments

Page 1 of 4

  • Comment number 1.

    And let's not forget the long-term either. The longer and faster GDP declines, the worse will be the picture for GDP growth and the Government finances for the next decade and more.

    The next Government will need to take an axe to public spending and we need an honest debate now on how bad the situation is and what should be cut. I nominate ID cards and Trident for starters.

  • Comment number 2.

    The problem with these sorts of figures is they take the economy as whole, rather than disecting it into it's various sectors. Given the state of the automotive and construction industries I suppose it's hardly surprising that the economy is still shrinking. However, looking at the sector in which I work (print and packaging) I can only say that since April business has improved, albeit from a very low base, month on month. June 2009 was actually better than June 2008, and July 2009 is significantly better than last month.

    Talking to other people dealing with other sectors of the (non financial services) economy - where people actually buy and sell real things, for manufacture the picture is also much brighter.

    The recession may not be over, but I really don't think it's as bad as the statistics and pundits want to paint it.

  • Comment number 3.

    So when is the emergency budget being called to revise Darling's nonsense 3.5% in 2011 'V' shaped recovery? That's the real story that isn't being covered here as tax revenues collapse.

  • Comment number 4.

    What a difference a couple of days make,early this week the treasury were "Spinning a way" stating that the budget deficit was as predicted in the budget.With today's figures the £175 billion is going to get blown out of the water by the end of the year.The ever increasing public sector borrowing has been a massive gamble which the good people of the UK will be paying back in the decades to come.A California type budget adjustment is surely on for the end of the year.

    Hopefully someone is going to stand up and tell the country the truth..

  • Comment number 5.

    The figures more or less chime with our experience as a small engineering company. We, along with many others, were counting clouds for something to do up until into June. Then, oh boy! June was our best month this year and July has simply gone manic. And it's not just us-others in our field, though not all, are also very busy. Maybe it's a flash in the pan, but could it just be the turn around? After all, it's small businesses like ours that are the best barometer of UK plc. I certainly hope so. It'll certainly make a change from the beeb harping on about swine flu! Will it cover a recovery as screamingly as it did the recession? I doubt it- good news doesn't sell does it?

  • Comment number 6.

    There's an interesting reaction from Frances Crook of the Howard League who basically says that a cut in criminal justice funding would be a good thing. http://www.howardleague.org/francescrookblog/public-services-funding

  • Comment number 7.

    There is a slowing of the pace of the economy at which it is declining and you would think we are shortly to return to growth judging by the comments. It is not even a dawn that becomes false! Just what will the engine of growth? Exporting ten pound DVD players to China? Growing incomes and employment, rising public expenditure, increase capital investment by firms on their knees praying for green shoots!

    The government will make it worse after the election and take out more purchasing power. Perhaps our credit card companies will double our credit limit and tell us to pay it back when we feel like it. The road to hell is paved by optimistic trending.

  • Comment number 8.

    Half full or half empty? You makes your choice.

    Speaking as a half-empty person the fact that the economy is still shrinking remains cause for concern as nobody has yet found the magic bullet that turns it all around.

    This should be the point at which the government steps in with a fiscal stimulus which does excatly that, however, as we know the government is broke and badly in need of a stimulus of its own let alone being able to stimulate anyone else.

    For as long as the wider public seek to pay down debt then things will not improve and they have an awful lot of debt to pay down. For as long as businesses have to struggle for liquidity then things cannot improve. We are in for a long haul whatever happens.

    There is a clear risk that if the government does not initiate some change to signal a desire to get a grip on public spending that our circumstances will take a further bad turn. It is touch-and-go.

    Whilst I appreciate some of the optimism expressed by earlier posters - and good luck to them - one swallow does not make a summer.

  • Comment number 9.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 10.

    With the declining economy the size of the public sector becomes a big issue. Last time the economy was this size at the end of 2005 the public sector was 10% smaller - Can we have a situation where the total economy is 5.7% smaller but the public sector has not shrunk at all? Presumably this is what is being played out in the budget deficit projections and it seems doubtful that increased taxation could ever make up the shortfall given how much smaller the non-govt economy now is.

  • Comment number 11.

    If the data that we're getting through at my work (I'm in market research/forecasting) is accurate, then Q4-2009/Q1-2010 looks the most likely to see the start of any proper recovery. As my workload generally tracks economic conditions 6 months ahead, and it's crazy busy right now, it looks like there might be some real potential in the early months of next year.

  • Comment number 12.

    Error Bounds:

    (I know I bang on about this) But I have just has a quick look at the ONS report and it would seem that the regions that the figures are subject to (over the last five years regardless of sign) is 0.2% so -0.8 actually means anything between -0.6 and -1.0 percent. (That is assuming that in these times of economic uncertainly the ONS manages to, by-luck, maintain its accuracy. which I doubt or rather to which occurrence I would intuitively not assign a high degree of confidence.)

    -0.6 would not be too bad and may indicate that the upswing is starting, however -1.0 is a quite dire situation. At -0.6 the Treasury will not be too embarrassed, but...

    All this business of a number really does indicate how non-scientific economics is...

    I would place less chance on a 'V' shaped recover than I did yesterday. More chance of an 'L' shaped one I am sorry to say.

    I still maintain that one of the major factors holding back the recovery is the over-pricing of assets held by the financial institutions. If the had to mark these assets to market they would have to take a large financial hit, BUT they would then be free to sell the assets into the market at their new lower price and then these assets could start being used to build up the economy. This is why I support bankruptcy for banks. Even the Americans have done just this to GM and Chrysler so that their can industry has a chance. But we are so stupid (or is it part of a cunning plan!) that we will burden ourselves unnecessarily with these dead assets. This is yet another case of the British politicians and civil service doing its best to cripple the country!

  • Comment number 13.

    In GDP per capita we remain one of richest nations in the world. Maybe we have to accept that even 2% annual growth is unsustainable. Our economy is matured, fully developed. Perhaps we have to let the rest of the world catch up and budget for long term zero growth. A falling population with a sustained GDP would actually mean increased living standards. Historically this country's pre-industrial population was 10-20,000,000 the industry's gone.

  • Comment number 14.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 15.

    Please help - I don't understand how, if things are getting worse, the stock market is rising all the time? Is this a good thing or should we be concerned about the reasons behind the rise?

  • Comment number 16.

    Sixty five consecutive quarters of continuous GDP growth averaging 2.5% per year, much of it based on irresponsible lending, fuelled several bubbles which now have to deflate. Just how far back in time that must take us is very hard to see given there's been a major change in what can be soundly/securely financed. If the economy is not to be put back on the road to ruin it was on before, surely it's obvious that we either have a very long painful period to go through, or else a short major shock where lots of people are very badly hurt?

    As sixty-five quarters only take us back to 1993 - maybe we should be thinking further back still? This anarchism began at least as far back as 1979, and yet it ws peddled as the opposite.

  • Comment number 17.

    Maybe the banks are lending the money to the governments that the governments had given them and this is all to support government spending that somehow works its way into econmoic forecasts and shows a positive trend. In the US the stock market is on the uptake while the unemployment is on the rise. Go wonder. Doesn't this all make you want to take bankers, economist and politicians put them on a space ship and shoot them off the planet....I would call it "Climate Change."
    No sign of new banking regulations....no sign of new oversight requirements....New Jersey School of Politics and Economics.

  • Comment number 18.

    Steph

    Darlings debt figures are based on 3.5 but the figure is 5.6%.

    And before you run out the BBC mantra Nobody saw this coming. Some of us did.

    The only question in town now is

    How big will this debt mountain grow.

  • Comment number 19.

    #14 If we don't openly discuss what matters, matters will only get worse, and then, people will be asking why nobody talked about what really mattered before it happened. Please think about this blogdog.

  • Comment number 20.

    #15. northJason wrote:

    about Stock Market Prices...

    1. Prices are set by the market makers. Have you every wondered why the aggregate indices move together, one goes up and so does the other e.g. the DOW and the S&P when they do not contain the same shares /stocks? A rational conclusion is that the prices are pushed around by the market makers is the only rational conclusion and these prices have only a little to do with the underlying company performances.

    2. One great odds-on bet was/is when it comes to the times of year that the pension funds received large bucket loads of cash, and knowing that their regulations forced them to invest their cash piles - hence the market normally goes up before hand and, then as soon as the cash is grabbed by the city, down again to take away the pensioners' money!

    3. Short term movements are traded by buying an selling by the second using programmed trades - this is yet another tool of the city to siphon away your wealth into their pockets for doing nothing.

    I could go on and offer a view on how the derivatives (options and futures) markets work, but I guess you get the picture by now.

    To answer your question about should we be 'concerned'... Well not really as the way the market works is the way the market works, and give or take the speed of trading, it has always worked. If your are an insider you make money, unless you are really stupid (or some catastrophic event occurs!)

  • Comment number 21.

    I've got a question: when we compare year-on-year figures for GDP, are we comparing the present with the period when the banks were reporting "false" profits: that is, profits which failed to reflect the true bad-debt risk, and which overstated their profits (unintentionally)? If that's the case, did the UK overstate its GDP during that period, making the y-o-y comparison invalid, or has that been corrected out?

  • Comment number 22.

    #9

    That is quite a list leonist, its contents have been around for a while growing unseen, it only gets exposed when the tide goes out.

    I see the same happening in the company I work for, I never had a great deal of faith in the management who it seemed to me had risen up on the crest of the wave of the boom, having high position through being at the right place at the right time rather than a great deal of talent and sometimes quite the opposite. Having things easy is not good preparation for anything in life.

    Those same people in the boardroom are now hampering the decisions required to save the company, through a combination of denial and over estimating their own capabilities, their egos massaged over many years of easy won success and high reward, reward they will never get again in a competitive market. Their game is to 'hang on' as long as possible, to ride the gravy train to the edge of the cliff then jump off just before it goes over.

    I find it immensley frustrating and a desperate inditement of human nature that the human traits which are most destructive in the long term are most rewarded in the short term under the current cultural climate in the west.

    This dynamic has given a nitro injection to the retreat of common values previously promoted by religion and community, things that are in astonishing retreat now.

    Stephanies figures are no surprise to me (and others) what so ever. You can not repair the system by quantitative easing or keynesian stimulus or anything else, the tail can not wag the dog.

    You can only repair the system by repairing the value systems by which we live and updating them suitable for the modern technology of the 21st century.

    Reason suggests the decline will continue until a crisis point is reached, there will then follow a period of chaos and something new will emerge.

    In the age of the internet it should be possible to a degree to shortcut that process which will involve huge unecesarry human suffering, there will still be suffering, there always is with any significant change, but we should be able to manage it better now through the power of the net combined with democracy and the power of modern technology.

    But there is not much time.

    lobbygroup.org is one place trying to build a shortcut.

  • Comment number 23.

    Anyone who thinks we will get a recovery by next year is nuts. Additionally, printing money (I refuse to call it QE) makes things worse because there are consequences. Once things start moving it becomes a runaway train and that money inevitably has to be 'taken out' of the economy by higher inflation which in turn will mean far higher interest rates. That will then plunge the housing market through the floor again. Goodness knows what will happen to the public finances.

    There do seem to be a lot of lunatics around who think that the economy can be stabilised in a few months and we can carry on our merry way. There has been to much stupidity over the past ten years for that, and it's still going on.

  • Comment number 24.

    #20 John_from_Hendon. If you are not concerned about how the markets work - why not short circuit the market and post money directly to Goldman Sachs?

    This firm has been before a New York court of law claiming that someone has stolen from them some proprietary source code, and that this code can be used to MANIPULATE MARKETS!

    It relates to high latency trading - of which Goldman account for about 50% of the market. Apparently the source code allows its owners to see other peoples trades before they are made. With that kind of information you can´t go wrong, and Goldman haven´t - they have raking in $100 million per day.

    What is going on is nothing more than a giant shake down operation. Catherine Austin Fitts (Investment advisor and former member of the US Government) is on record as advising clients to stay out of US markets because they are rigged. Check it out!

  • Comment number 25.

    Post 22 - I agree with your comments entirely and I've also joined this group.

  • Comment number 26.

    Are the markets rigged? Well probably.

    To me the stock market has always appeared like a bookies in that the odds vary to suit the turf accountant AND you can't be sure if the race is fixed.

  • Comment number 27.

    Thank goodness the economy is shrinking; at least there may be less consumer greed generated by irresponsible bankers, advertisers and hype from the media. Who knows - we might even get less packaging to throw into landfill, a few less cars on the roads with more people using public transport - or even commuting less. Fewer imports, maybe cheaper houses, more volunteers and communities working together. Hey, we may even get families to communicate more closely instead of going out on the "me, me, me" binge (be it alcohol, clothes or other consumer 'needs'). Ask yourself: Do I really need a flashier car? A new pair of shoes? More deodorant? Another "designer" product? (What exactly is a "designer" item? Surely most items are designed?)

  • Comment number 28.

    12 John_from_Hendon

    ''Even the Americans have done just this to GM and Chrysler so that their can industry has a chance.''

    'can industry'. Brilliant John from, I supect it is a typo but it is all the better for than. Made my day.

  • Comment number 29.

    22 Jericoa

    You are describing accidental or coincidental success and there has been much of it about. Those orifices who wish to be seen as the one passing all understanding are quick to peddle the notion that it somehow has something to do with them. Shame. It really would be good if the genuine thing was about, but most of the time it is not. When the very high profit based sucess rate is too high it has to be accidental. Competition normally balances things out. This remains the big problem with the banks and the idea that of London as a major financal centre. The question remains just how much of Londons success was accidental. If it was considerable then the revenues generated are highly likely to never return and we have to see what the new level settles out at.

  • Comment number 30.

    You should read this. It is worse than you think. And there seems to be no end to it.

    http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html

  • Comment number 31.

    #28. glanafon wrote:

    Yup, sorry for the type, glad I car amuse you!

  • Comment number 32.

    #30

    I have read it now, others should too, it is not worse than I thought it just confirms it, in my case anyway.

    What gets me is people like yourself whom clearly have an in-depth understanding of it and is a very good communicator and an established background in this field do not get mainstream constant coverage by the media.

    The incumbent economists from the same institutions selling the same story are wheeled out to discuss which ineffective measure is more or less ineffective than another (in my view this goes deeper than any economic fix so queezing or investment in capital projects will all be ineffective).

    You should be on Newsnight, you can take these guys on, on their level and expose them.

    Someone like me could not and i would never be invited, I can see what is going on but I have no credibility, I don't have the vocabulary, they could tie me in knots using words and I do not understand and theories I am not aware of, I have not written a book, I am not a Dr or a professor from some university or part of a leveraged think tank, all of which seems to be pre-requisites for getting any media coverage.

    The media have a lot to answer for their complacency in the choice of the opinions they seek.




  • Comment number 33.

    #29 glanafon. The "success" of the City was in no way accidental, but in every way a mirage.

    The problem is most people will not or cannot recognise it for what it was/is. Hence ever money is being thrown their way. You cannot make something real just through force of will.

    Brace yourself for another major lurch downwards sometime soon.

  • Comment number 34.

    #24. armagediontimes wrote:

    "Apparently the source code allows its owners to see other peoples trades before they are made"

    The process you describe, works - well sort of. Let us say you are electronically options trading on the US market (the UK market is too small and you are too visible!) Essentially what the software (that I know about) does is by examination of the short term history of trades, volumes and prices produces a reasonably accurate short term prediction of the likely up or down movements and the levels to which the price will move to. I'm not going to tell you how it works, for if I did, as one of my colleagues said to a recent curious visitor - I would have to shoot you!! Anyway, the maths is rather hairy, chaos theory helps.

    I suspect that Goldman's more sophisticated internal software was the one they claim was nicked. The catch in operating these systems is that there still needs to have human supervision and you need quite a bit of courage and money to operate it - and you must also have a 100 per cent reliable data feed and trading account. (and another think it makes you UK tax return a gigantic problem as you have to list the trades and there can be 100s or thousands a day for a couple of hundred days a year and as they are priced in USD the sterling exchange rate kicks in too. Don't even think about doing it without a fully integrated computerised accounting system linked to your trading system which itself is not inexpensive as you need no data feed delay at all.) It does work, if you have the bottle and like working 2:30pm to 9 ish UK time. Oh, and you get square eyes!

    The system I know about is about 80-90 percent reliable - just think picking the winning horse in every race of every day - 80-90 percent of the time - (and not being the bookie!) It does have off days and hours - the skill comes from knowing when to believe your system's prediction and then moving in and out very fast in seconds at the right time - 100s or 1000s USD per point on occasions. (When you see it going wrong reverse the trade immediately ! It works by taking money from people with less effective algorithms or with no computerised trading advice system at all and sometimes from the people with completely automated systems that get it wrong!

    Next time you are in the trading room have a look at the screens and see if any of the squiggly lines run ahead of the actual data by five minutes or so.... It is quite fun to watch the predicted things happen, when you predicted they would happen and at the prices you and your system predicted. It can also be quite profitable.

  • Comment number 35.

    33 arm n leg

    Yup, I thought I would get corrected as I posted it. And strangely enough I thought it might be you. lol. But the issue is it is largely either accidental or deceitful, not genuine capability.

    Sadly I think your lurch is probable. A wonderous uplift would be nice but bumping along seems more likely. I cannot see any great resolution to the erosion of the low wage zone on the western economies coupled with the massive debt lurking in the system. Just what is hidden by the teams of high IQ people employed to do just that. I do not understand what all the excitement about an uplift is. I cannot see clean green tech providing the expansion necessary for growth. I can see nothing but substantial cuts in the public sector. The demographic problem has yet to be fully played. The pension problem has yet to be sorted. The youth unemployment problem will grow and fester. Graduates appear to have little job opportunity, many I hear about are jobless and no idea what to do to sort the problem. Yet we heard today of a friends property selling and there seems to be increased footfall in estate agents, beats me.

    However we are still in growth so we are doing our bit.

  • Comment number 36.

    #34 John

    As someone more familiar to the ins and outs of high finance, perhaps you can help me out with the questions I posed here:

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/07/business_still_being_crunched.html

    If as a bank I have moved a certain amount of money around 50 times, have I actually worked 50 times harder, have I "made" 50 times more productive output?

    My hunch tells me "no". The likes of Soddy, and the spate of money reformists in the early 20th C said "no". Mr Satyajit Das of Traders, Guns and Money fame implicity says "no" (he states that derivatives / trading does not create wealth, it merely transfers it).

    Has this been proven one way or the other? If not, then does this question not cut right to the heart of the current crisis?

    While Gordon and his cronies preach: finance, finance, finance
    China's maxim is: manufacturing, manufacturing, manufacturing (with a bit of monopoly control of raw material input thrown in)

    I wonder which is the right strategy.

  • Comment number 37.

    34 John from

    Hmm. Interesting. Either you move to rapid data analysis with robot capture, which can pick up the data before it is even visually displayed on screen or you look for key markers and data sets which a human can observe and react to. The approach you are suggesting appears to try and incorporate both. On the markets I have observed, not stock exchange floor, I use the key data sets and price dynamics in a particular subset. The problem with the robot approach as I see it is convergence in the software inevitably results and the problem is that it can only drive you towards spread purchasing which introduces inefficiency. As more and more software converges it drive inefficency upwards as it introduces more and more spread purchasing, that is my observation. It seems to me that the human content you refer to is a delibrate compensation model to intervene and increase efficiency. When I have purchased I just use a human model but you have to have identified the marker subsets.

  • Comment number 38.

    #30 Greg

    Thanks for the link, will take the time over the next few days to read your blog.

    In undertaking your research have you come across Frederick Soddy?

    http://en.wikipedia.org/wiki/Wealth,_Virtual_Wealth_and_Debt

    And is this short little piece by Eric Zencey on the same track as your assertions:

    http://hnn.us/articles/47330.html

    Or is the pyramid scheme limited just to the use of certain financial improprieties (rather than inherent in fiat monetary systems per se)?

  • Comment number 39.

    Why are people surprised by this? It is obvious that over the past few months there has been a concerted attempt from government and media to talk up the economy when it is clear to all disinterested parties that the economy is a basket case. All this talk of green shoots is just nonsense. People (and the city) are forgetting that the ONLY reason that we are not in financia armgeddon is because the government has bailed out the financial industry with several decades worth of future money that the rst of the country will be paying of for the next 50 years. The FTSE may be in cloud cuckoo land but not for much longer....

  • Comment number 40.

    #30 Thanks very much :-) BUT it's actually nothing new. Galbraith describes the process in "Money - Whence it Came, Where it Went" (To regular bloggers: sorry for repeating myself). He also published a blueprint for every leverage induced economic crisis in his book "A Short History Of Financial Euphoria". Well worth a read: in recent months I have bought (with my own money) several copies for friends and acquaintances (including my MP who sits on McFall's committee).

    The economy is still shrinking partly because the "multiplier" for purchasing power from deposits is less than during the boom: hence the "justification" for QE.

    BY THE WAY, ALEXANDER CURZON HAS BEEN BANNED FROM THE BBC BLOGOSPHERE FOR "DISRUPTIVE" POSTING. Disgraceful in my view - and self-defeating! Nor do I really understand why. There is at least one regular blogger here who is genuinely disruptive and seeks to hijack every blog to a very different agenda. Why is it AC who was banned?

  • Comment number 41.

    36 Hawkeye_Pierce

    Finace is not my field but I have played in the manufacturing field.

    One is short term and one is long term. The short term can yield dramatic profits (and losses). The long term one demands a secure environment, concerted and sustained effort and a supporting network of expertise.

    If you take a look at the background of Thatchers government, which is where the current problems started you will find a disproportionate number of people who had made money in short term ventures (lots of property dev for example).

    As short term ventures suit a short term political environment (4 year cycle) and appear very attractive to accountants it is no surprise that road has largely been taken. Opposition to the short term road was ridiculed repeatedly and the silver and jewels sold off to lubricate election filips. In fact one current response is to try to find stuff to sell off. Labour appeared different at the start but effectively said they would stick to Conservative policy upon election.

    Brown then apparently became entranced with the City money machine which gave an easy answer to his infrastructure and service aspirations. He seems quite Roman to me.

    To re-establish a long term sector now is a considerable problem. The flywheel has to be built and to be got running, meanwhile, elsewhere, things are not standing still. Pretty much gane set and match. There are solutions but they do not help with the grandiose tax collection desired, and now expected by the general population.

    The long and short of it is that short term activiites can be stolen and moved elsewhere or are a transient. Long term activities demand long term care and attention and are undermined by low wage zones elsewhere. Thus the pressing issue is one of decline, which if ignored or not acted upon builds up destructively. Only one part of the game has been played so far and it is naive to think matters are going to be one of easy uplift. As soon as progress is made another major lurking problem will manifest itself in all probability. An aging population with high expectations will not help and remorsely is getting closer. There is some evidence that economic cycles run on a decade long cycle so if in 5 years things are improving, if, then we are halfway to the next dip. A big uplift is needed to prepare not to be knocked back again, which other than the City (and asset ie property market manipulation) has been the case I would suggest.

    But you know that already or you would not be asking..

  • Comment number 42.

    #37. glanafon wrote:

    "Hmm. Interesting..."

    Essentially the continuous computerise modelling of market behaviour. The chaotic market turns out to be full of patterns and repetitions. Why doesn't seem to matter (and the study of which is a full time activity.) Most trading organisations have their own algorithms. The ideas behind neural networks, stochastic processes and chaos contributed to the experimentation and the modelling - and computing can now be processed on a pc. Often the market in a particular derivative is predictable for a few minutes if you have access to up to data real time data feeds (plus the right software)and that is ample time to get in and out and make a few hundred or thousand dollars. In theory it should not work, but it seems to!

  • Comment number 43.

    All this economics stuff, is mind boggling. Different papers say different things. What is the best way to learn Economics, so us mere mortals can decipher what conmen like Ben Benanke, Ed Balls, Georgie Osbourne, Everyone at Goldman Sucks say. From now I am keeping all my cash in my shoebox. I suggest everyone else do the same.

  • Comment number 44.

    #36. Hawkeye_Pierce wrote:

    "As someone more familiar to the ins and outs of high finance, perhaps you can help me out with the questions I posed here:

    More low cunning than high finance I am sorry to say! But I put my twopennyworth in the melting pot.

    First: As far as I am aware CDSs tend to be traded over the counter - that is not through an exchange so access to the data is tricky for everyone concerned. (Hence the concern to get them put through an exchange system so there is a chance of regulating the market.)

    Second: Most of the OTC markets work on trust that the trades can be and will be settled.

    Third: I think I am right in asserting that the speed of circulation question is one that has been studied by economists and the conclusion is that the faster that goods and money move the greater the value of transaction that take place in a given period of time using the same capital.

    This is the reason that just 60 billion US dollars of mortgages generated 600 billion dollars of derivatives. Nobody really knows how many derivatives contracts are out there so far as I know. (Anyone any idea?)

    addendum: This should have been understood long ago by the Fed and Bank of England (M. King) etc. and stopped (or at least alarm bells should have been ringing for years)! The fact was because of the structure of these, essentially insurance, contracts so long as the parcel kept being passed and the mortgages performed the brown stuff did not hit the blades of the rotating metal air moving device - but the rest as they say is history. (And of course the faster the parcels moved the more 'fake' profits the institution made and the bigger the bonus!)

    It also concerns me that it will be many years before the extent of the CDS and associated derivatives nonsense is worked through. Many institutions both bought and sold the same contract to cover themselves so those will cancel out, however there will be a few institutions with uninsured (and gigantic) losses. Let us hope that these have worked through the system already!

  • Comment number 45.

    #43 Modernizer

    "What is the best way to learn Economics?"

    Read the Paul Jorion blog.

    This economist and anthropologist, who forecast the recession, as did Nouriel Roubini, with whom he is in agreement on a number of key points, not least the illusory nature of the so-called green shoots, yesterday issued an audio-visual assessment of the present state of affairs, which can be accessed at

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 46.

    #44 John_from_Hendon,

    I have nothing to back this up with except, the accounting fiddles (sorry changes) for Wall Street institutions and the insane reluctance of banks across Europe to make full disclosure of their true financial positions, but I don't believe that the losses have worked their way through the system.

    I have the feeling that we have had the earthquake and are now in a hiatus awaiting the tsunmai. It has a lot of similarities to the Phoney War at the start of WW2.

  • Comment number 47.

    #43 Modernizer

    "What is the best way to learn Economics?"

    Read the Paul Jorion blog. This economist and anthropologist, like Nouriel Roubini, forecast the recession and has today issued an audio-visual assessment of the present state of affairs, which can be accessed at a site which, evidently, I am not allowed to provide a link to. So you will have to find it yourself.

  • Comment number 48.

    #46 foredeckdave

    Insightful. Spot on. Jorion agrees with you (#47). Something monstrous this way comes.

  • Comment number 49.

    Further to my #47, I should make it clear that it is the French version of Jorion's blog that his latest assessment appears in, not the English-language one.

  • Comment number 50.

    #48 frankly_francophone

    Thank you.

    For well over a year now I have been calling for protectionist measures as a means of the UK survivng this debacle. I am now more convinced that it is imperative that protectionism is adopted on a pan-European basis.

    The UK economy has its own problems and they are different from those of France, Germany, Spain, etc. However, if my nightmares are anything like true then we are all facing a matter of survival rather than economic advantage. Survival I believe is possible if the EU acts in concert. I have no idea how we can make our leaders see this.

  • Comment number 51.

    50 fdd

    The bigger war is within not without. If you face the wrong way you will get shot in the back. A major proportion of the domestic population who hold voting influence are due to be told the reality is there is not the money in the system to provide what they are expecting. A drop in affluence will provide the answer to imports. You are still looking the wrong way. The only way to operate in a hostile environment is to be mobile, flexible, adaptive, quick and to move faster. This is why small groups of badly equipped but mobile personnel can tied up a considerable resource in conflict. However tax yields for the provision of services is going to be hard to come by from a small adaptive activity. You are seeking to change the environment not the mode of operation. It is less effective and probably will not work. I would describe it as synthetic. Darwin has the answer. : )

  • Comment number 52.

    42 John from

    Modelling - The objective is to meaasure intent or behaviour which is irrational so the issue of whether something should or should not work is irrelevent because the irrational is being monitored. Essentially it is a question of looking for behaviour markers. That is my conclusion.

    Lurking CDOs. There is quote somewhere along the lines of - A man is debt lies, he has no other option - somebody like Benjamin Franklin I think, can't remember. However the whole basis of the boom was a game of pass the stinking parcel. Dishonesty is central to it. When big business is facing meltdown is not the time I expect the highest level of honesty. So something unpleasent may well this way come, fair chance of it. The situation is further clouded by the fact that valuation is a variable, an estimate and there will be the desire to not dump suspect assets on a dead market. I can understand your position that a forced sale, ie bankruptcy is a solution but the fact remains that there is no market, that is why the Fed had to rapidly dump the idea of asset auctions. Therefore a forced sale can only cause truely massive write-offs and probably a meltdown. The only hope for some recovery in value is to give the matter time. Fundimentally it is a matter of government failure as well as commercial self harm. Every citizen is being mugged but few arrests are being made. The thing is if something unpleasent this way comes there probably is not any money left in the kitty to deal with it they way they have so far.


  • Comment number 53.

    PS to post 52

    Modelling the irrational - Incidentally this is why I have little faith in economics as a subject. It is quite obvious that irrational behaviour has a great deal to do with trading and therefore with consumer activity. It is fundimentally flawed to believe you can rationally model the irrational and that is why we are where we are today. Too much faith in rational models. The mavericks pointing at rising problems used observations of irrational behaviour tied in with basic imbalances in the rational model to warn of a downside. The opponents of the warnings, and there were many, ridiculed the irrational behaviour based assessment and said the rational model did not recognise the problem, which of course it wouldnt. IMO.

  • Comment number 54.

    sashaclarkson (#40) "Disgraceful in my view - and self-defeating! Nor do I really understand why. There is at least one regular blogger here who is genuinely disruptive and seeks to hijack every blog to a very different agenda. Why is it AC who was banned?"

    Might it depend on the nature of the 'disruption'?

    Does not the behaviour driving the recent economic crisis need to be 'disrupted'? Painful though that may be to those who have either driven it, or colluded (often wunwittingly) with it, that would be benevolent disruption if it could be achieved would it not? Is that not what Darling and others have said is the sine qua non? Yet many here still expect it to be business as usual whilst asserting otherwise do they not?

    It isn't the word 'disruptive' (or even the action) which matters per se, but the overall context determining its 'meaning' (see the last third of 'Two Dogmas' on 'meaning holism', a notion which goes all the way back to Frege and the beginning of programming in fact). The problem is that people's core assumptions determine where their behaviour takes takes them, and for change to occur, those assumptions often need to be radically disrupted i.e. sometimes one has to be cruel to be kind. The current problem is not going ot go away unless and until there is a major change of the sort which that I have been highlighting, as the problem is perpectuated by dogmatic a priorism.

    Keep working on it.

  • Comment number 55.

    #43 The problem with learning economics, is that much economic theory is theology rather than science. People believe, and teach, what they would like to be true rather than what is true. This was certainly true of the Chicago and Austrian schools.

    The next thing about economics, is that like politics, even if you live more or less in the real world, you have to decide the really important question: Whose side are you on? There is no "neutral" economics. Choices have to be made which will favour one group of people rather than another. Or, to put it slightly differently: "How much of someone else's pain are you prepared to accept for your own benefit?" One to ask yourself next time you buy cheap clothes in a discount store?

    If you want an approach to economics which promotes gradualism where possible to minimise pain, but seeks the greatest good of the greatest number, then read Keynes and his followers like the Galbraiths (father and son) and Krugman.

    Start with "The Great Crash" by JK Galbraith. For views of the Gold standard and its demise also try Keynes' "Essays in Persuasion". The good thing about both these works is that, even if you are of a different political persuasion, you will gain enough understanding of how the system works to understand the real consequences for real people of political/economic decisions.

    If you want something a little different, try Robert Heinlein's posthumously published first novel "For Us The Living". This gives a very good exposition of Major CH Douglas' Social Credit philosophy of money and economic activity. I neither recommend nor reject Heinlein's other social ideas.

    If you believe that it should be a natural law that your money increases in value, I'd also strongly recommend the following Wikipedia article:

    http://en.wikipedia.org/wiki/Wealth,_Virtual_Wealth_and_Debt

  • Comment number 56.

    "And, of course, it makes it that much less likely that the Treasury will hit its forecast for 2009 of a 3.5% decline overall. From where we are now, you would need growth of maybe 1.5% or more in both of the second quarters to make the numbers add up."

    And pigs will fly !! Oh, look, there's Wing Commander Porky !!

    "No 10 had a different view, and in the end, the forecast was for a decline of 3.25-3.75% this year."

    And who knows what they put in their pipe ??

  • Comment number 57.

    #13 "In GDP per capita we remain one of richest nations in the world. Maybe we have to accept that even 2% annual growth is unsustainable. Our economy is matured, fully developed. Perhaps we have to let the rest of the world catch up and budget for long term zero growth. A falling population with a sustained GDP would actually mean increased living standards. Historically this country's pre-industrial population was 10-20,000,000 the industry's gone."

    The industry's gone and with it, the *real* wealth !! What this GDP comprise of is ever mounting debts !! This standard of living will last so long as the creditors don't call in their loans !! When they do, it will be the debtors prison for everyone !!

  • Comment number 58.

    #20 "If your are an insider you make money, unless you are really stupid (or some catastrophic event occurs!)"

    Have you asked Nick Leeson or Jerome Kervail ?? There was also an oil trader recently but I forgot his name !! :-)

  • Comment number 59.

    #53. glanafon wrote:

    "Modelling" I lookup on it this way some of the methods seem to work over the short term It is a bit like statistical mechanics describes the way that molecules move in a gas. To make money all you need to be is better than 50 percent accurate on direction of movement and the price it will move to and many of the systems are as good as this. Trading system modelling only needs to work over the short term. Indeed the longer term models, where actual events impinge on the price, don't seem to work. The short term models are essentially looking at the short term dynamics of transactions. In the way fro example stochastic processes describe why in heavy traffic cars tend to stop and start rather that flowing smoothly - hens the variable speed limits on the M25 etc.

    (I share you view of economics - a busted flush!

    #46. foredeckdave wrote:

    "the accounting fiddles (sorry changes)"

    And beware of mark to market! This I believe grew out of the knowledge within the system that they way that they were accounting (fair value) had stored up huge inherent dangers. They chose to move to mark to market but the consequences was (in part) the crash.

    Accounting procedures are in the end set by regualtors and governments... need I say more.

  • Comment number 60.

    #22 "I see the same happening in the company I work for, I never had a great deal of faith in the management who it seemed to me had risen up on the crest of the wave of the boom, having high position through being at the right place at the right time rather than a great deal of talent and sometimes quite the opposite."

    The Peter Principle, by Professor Laurence J Peter and Raymond Hull (1968), states that employees tend to rise to the level of their incompetence !! The bigger the organisation, the more likely it is !! Also, the more levels of hierarchies there are, the worse it gets !!

    If you are nearing the top, then BEWARE !! :-)

  • Comment number 61.

    #24 "If you are not concerned about how the markets work - why not short circuit the market and post money directly to Goldman Sachs?"

    Oi !! I have a bank account, too !! Why not post it to me, instead !! I, too, am in dire need of millions in bonuses !! :-)

  • Comment number 62.

    #27 "(What exactly is a "designer" item? Surely most items are designed?) "

    They are items so labeled by their marketeers in order to extract the maximum out of your pocket !! Or, in the words of P.T. Barnum, "There's a sucker born every minute !!"

  • Comment number 63.

    #34 "Anyway, the maths is rather hairy, chaos theory helps."

    Chaos thinking helps even more !! But at the end of the day, it's still data-mining through a complex filter !! :-)

    "and another think it makes you UK tax return a gigantic problem as you have to list the trades and there can be 100s or thousands a day for a couple of hundred days a year and as they are priced in USD the sterling exchange rate kicks in too"

    All trades should be mere rows in a database and, if there is a good FX module in place, any sum can be expressed in any currency with reference to original sum in the original currency and the FX rate ruling at transaction date/time !!

    "Don't even think about doing it without a fully integrated computerised accounting system linked to your trading system which itself is not inexpensive as you need no data feed delay at all"

    It's only needed for the bean-counters (speaking as an ex-bean-counter) and the vampires (oops, sorry, I mean the honourable taxmen) !! Otherwise, it will happily function on its own !!

    "It does work, if you have the bottle and like working 2:30pm to 9 ish UK time. Oh, and you get square eyes!"

    And a predilection for lots of strong black coffee and stronger ciggies !! :-)

    "It works by taking money from people with less effective algorithms or with no computerised trading advice system at all and sometimes from the people with completely automated systems that get it wrong!"

    And unto those who have more, more shalt be given - the Bible !!

    "It is quite fun to watch the predicted things happen, when you predicted they would happen and at the prices you and your system predicted. It can also be quite profitable."

    Unless you bet your shirt and your first born child and it goes the other way !! That's why brown trousers are *ALWAYS* recommended !! :-)

  • Comment number 64.

    40 sasha

    I'm sorry to hear AC has been banned. Seems a bit rough. Perhaps someone will fill the gap. YOU NEVER KNOW. AT LEAST HE HAD SOME ENERGY AND POSTED UNDER HIS OWN NAME. OH DEAR MY CAPITALIST KEY HAS STUCK ON MY KEYBOARD AGAIN. STILL I EXPECT WE WILL ENJOY AN ANDREW BRONS TYPE POSTING EVERY DAY TO FILL THE GAP.

  • Comment number 65.

    John_from_Hendon (#59) What you're describing is gambling/betting which isn't really a science at all, but it did give birth to probability/statistics in the vain hope that some sort of 'system' could be derived (a priorism was busted by Godel). The utility of Dynamical Systems Theory is dubious too, as in the practical applications you refer to this just comes down to lagged Time Series which are really not much more than fancy moving averages. Ignorance/spin in this area is largely why this financial mess came about is it not?

    We need to get back to business fundamentals all round do we not, i.e being more honest (regulatory) about what can and can not be predicted/managed? Do you see how that can be enforced in practice within the current liberal political system? I don't.

  • Comment number 66.

    #36 "While Gordon and his cronies preach: finance, finance, finance
    China's maxim is: manufacturing, manufacturing, manufacturing (with a bit of monopoly control of raw material input thrown in)

    I wonder which is the right strategy."

    My take is *NEITHER* !! Without free and sustainable trade, neither will survive !! China had already learnt the lesson of shrinking resources and is trying to find a suitable answer !! They know they cannot keep manufacturing forever without a similar input of resources !!

    Will Crash Gordon and his crew realise what *IS* wrong and try to find an answer ?? Answers on a postage stamp written with a 10 inch brush, please !!

  • Comment number 67.

    Thank you, sashaclarkson (#55) for your elegant summary: "The problem with learning economics, is that much economic theory is theology rather than science. People believe, and teach, what they would like to be true rather than what is true...".

    To the non - economist (me, for example) this perhaps explains why so much of what we see and hear on a daily basis in the "media" or even read here is at best bewildering navel - gazing that appears to be more concerned with which "theory" appears to be the best fit to our current predicament rather than trying to identify detailed practical solutions. I have a mental picture of large numbers of rabbits caught in car headlights; trouble is clearly looming but the ability to react to it has clearly deserted them.

    The problem is compounded by the fact that the word "economics" can be deleted from the quotation and replaced by "politics" and the sentence still makes perfect sense.

  • Comment number 68.

    #37 "As more and more software converges it drive inefficency upwards as it introduces more and more spread purchasing, that is my observation. It seems to me that the human content you refer to is a delibrate compensation model to intervene and increase efficiency."

    Computers cannot *THINK*, humans do !! Therefore, this war is one between competing Systems Analysts and Designers as to whose software can give the closes approximations to human thoughts but at a far greater speed !! Software can only process data when given set(s) of conditions to process them in. The better the conditions, the better the output. GIGO (Garbage In, Garbage Out) has been in IT since the first computer was built !! As software designs move ever closer to mimicking human thinking, the need for ever more difficult algorithms are needed. Hence the need for chaos theory that John_from_Hendon mentioned !!

    If a designer builds a better mousetrap, he'll slam the killing bar on the necks of the other mice before they can get to the cheese !! Then another designer builds an even better mousetrap..... !! :-)

    Solid state drives at 10 paces ?? Used CRT monitors at 5 paces (they're damn heavy, those things) ?? :-)

  • Comment number 69.

    #43 "From now I am keeping all my cash in my shoebox. I suggest everyone else do the same."

    Not likely, mate !! Especially when the moths get at it !! I'll keep mine in gold; at least it will break the little b...... teeth if they try !! :-)

    Besides that your paper will soon devalue to nothingness whereas gold will still have some residual value !!

  • Comment number 70.

    #55 "Whose side are you on? There is no "neutral" economics."

    There's always Mercutio who (purportedly) said, " A plague on both your houses!" - "Romeo and Juliet" by one Billy Shakespeare !!

    "If you want something a little different, try Robert Heinlein's posthumously published first novel "For Us The Living". This gives a very good exposition of Major CH Douglas' Social Credit philosophy of money and economic activity. I neither recommend nor reject Heinlein's other social ideas."

    He had some strange ideas regarding incest, etc. !! But his tales were works of wonder to an impressionable 14 year old, moi !! Grok ??

  • Comment number 71.

    SEXY VAMPIRES

    ishkandar (#68) "Hence the need for chaos theory that John_from_Hendon mentioned !!"

    If you look into it, you'll see it technically washes out as probability/statistics in practice (the work of the actuary), i.e. uncertainty and risk assessment/management or 'insurance' (CDOs, hedging etc) - precisely what got out of hand in the first place through lack of regulation. That was no accident, it was legislated for, and that legislation has not been repealed. We've just had months of spin and distraction (MP's expenses, (A)H1N1, you name it).

    In the end, it just comes down to usury which is very profitable. Those currently raising mortgage rates and credit card APRs are quite content to do business as usual even though the money costs them next to nothing, and is often coming from the very people they are lending to, albeit via a long loop delay...

  • Comment number 72.

    #40 Sasha

    JJ probably gets away with it because the single issue poison hidden within his posting is rather subtle and probably goes under the moderators radar. An Issue AC has never had, thank goodness, his directness was refreshing.

    JJ takes on the manor of a patient teacher surrounded by petulent students whom he has a duty to educate with the benefit of his self confessed superior insight, yet blind himself to the effect he has on others and his own narrow mindedness.

    The goal in life should be happiness, happiness is not related to IQ or genetics. You will see more happiness in a gospel choir in harlem on a sunday than all the dry debate and analysis in dusty tomes on genetics and IQ put together.

    It is quite sad really....

    but he still has time to learn :)




  • Comment number 73.

    #53 Glenafon

    Quite so.

    As a matter of interest, Nouriel Roubini, who has nothing very encouraging to say about the so-called 'green shoots' of recovery, recently accounted for his deviant foresight. In a speech at Yeshida University, a video of which can easily be tracked down on line if you are interested, he claims an ability to stand aside from the madness of the crowd which can be attributed to a contrarian mental discipline not unrelated to his outsider background as a Jew brought up in Turkey and then Iran.

    If you observe Roubini's media performances, you may notice that in America he has to tread particularly carefully, of course, as there is always someone ready to pop up there to say something along the lines of "And just what is it that you consider to be so very wrong with the American way of life, Mr Roubini?" Even relatively innocuous Robert Shiller, who knows his way around his home patch, fell into that trap recently, to his own astonishment. Roubini appears to be too circumspect to fall into any traps, on the other hand, although misrepresentation of his views is an ever-present danger, as perusal of a recent entry in his blog should reveal.

    We are obviously living in unusually interesting times, especially if Paul Jorion is right to claim that the Crisis is of such a nature that the future of capitalism is in doubt. At the very least, he claims, confidently, as if nothing could be plainer, that the character of the US economy (and the American way) is undergoing a transformation which precludes any return to the way things were. In other words, the US (and the EU, inter alia) are doomed to become more authoritarian and protectionist command-economy zones in response to the extreme challenges of the Crisis. China and the West are coming to resemble one another more, that is to say, not because China is adopting western ways but because Anglo-American capitalism is broken and cannot be fixed.

    Naturally, this is not a popular view, and Mr Jorion will never receive the Nobel Prize for economics if he goes on like this. Not to worry. You only have to listen to him for less than a half a minute to know that he couldn't care less about that. What does he care about? Why, telling the truth, of course. This man is dangerous.

  • Comment number 74.

    #70 ishkandar
    "But his (Heinlein's) tales were works of wonder to an impressionable 14 year old, moi !! Grok ??"

    Yep - my favourite was probably "The Moon is a Harsh Mistress". Heinlein had an enormous influence on me. Not because I agree or agreed with him, but because so often he dared think the unthinkable. One was shocked into thinking for oneself! The first book where he mentioned Social Credit was in "Beyond This Horizon", a rather more polished novel than "For Us The Living", but a less detailed exposition.

    One little gem from "The Moon ..." is where he has a character explain that you can't get insurance on the Moon, but you can go to a bookie and make a bet --- and that the transaction is essentially the same! I first read this book (out of the library) at the age of about 14 too, but I bought the hardback recently and it had lost none of his charm.

    Funny enough, my late mum loved Heinlein too, although she wasn't keen on SF in general.

    Another favourite Heinlein definition: an "honest politician" is one who "stays bought".

    I think "grok" is a wonderful word, which deserves wider use.

    http://en.wiktionary.org/wiki/grok

    Mum used to use it in Russian with me, eg: "On nye grokal" - "He didn't get it".

  • Comment number 75.

    #72 Jericoa

    Did I mention a name?

    to quote Francis Urquhart: "You might think that - I couldn't possibly comment!"

    ;-)

    PS On teachers in general: there's nothing worse than somebody who poses as one, preaches certainties, but doesn't really know or understand his subject.

    I've visited the new lobby group site BTW - very good - I'll be there in earnest in about a month - I look forward to some lively but constructive debate.

    Right - computer's going off now: the veggie and flower gardens are complaining of neglect!

  • Comment number 76.

    #65. JadedJean wrote:

    "What you're describing is gambling/betting which isn't really a science at all,"

    Never claimed it was a science, but it is the one we use and it seems to prevent the worst errors and provides a reasonable yield. There is no science, in the sense of a methodology based on any deep understanding of the way things work. It is a misunderstanding to call it a science, a bit like economics!

  • Comment number 77.

    #63. ishkandar wrote:

    "Computers cannot *THINK*, humans do"

    One of the reasons that trading systems work is that there are many people using the same or similar systems plus you need to be an insider.

    This is not really the place to dissect what computers, fleshy or microchip, can do, but I have not formed the opinion that neither humans nor computers 'think' much of the time. Otherwise the gigantic and obvious disaster of the credit crunch might have been foreseen and prevented! Human thinking is vastly overrated! Within a decade the medical people believe (and there is another unscientific lot!) that they will be able to produce a microchip human intelligence (by the way it has always been a decade away sine the 1970s!)

  • Comment number 78.

    #71 "(A)H1N1"

    No surprise here !! Plenty of swine around !!

  • Comment number 79.

    #74 "One little gem from "The Moon ..." "

    "The Moon is a harsh mistress" !! That's the title you are thinking of !! He also postulated lobbing rocks from the moon as a kinetic weapon long before the military even though it was possible. The, then, American military were totally obsessed with ever bigger nukes !!

    "where he has a character explain that you can't get insurance on the Moon, but you can go to a bookie and make a bet --- and that the transaction is essentially the same!"

    No, it's not !! A bookie does *NOT* charge you brokers' fees, admin fees and then try to welsh on the claim using the fine print !! :-)

    I believe his most famous acronym is TANSTAAFL - There Ain't No Such Thing As A Free Lunch !!

    In my youth, I had to wander abroad in search of a crust, or even a crumb !! The very first time I landed in a country where English is barely spoken, if at all, the very first thought in my mind is "Oh, oh, Stranger in a Strange Land" !! :-)

    Meanwhile, back on topic.....

  • Comment number 80.

    #77 "Within a decade the medical people believe (and there is another unscientific lot!) that they will be able to produce a microchip human intelligence (by the way it has always been a decade away sine the 1970s!)"

    Currently, artificial intelligence is about on par with military intelligence - an oxymoron !! All that hoo-haw about OO methodologies producing near human intelligence is just that - hoo-haw !! Producing true artificial intelligence, I think, will not succeed even in my grandchildren's lifetime !!

    Meanwhile, there's still money to be made !! P.T. Barnum was correct !!

  • Comment number 81.

    John_from_Hendon (#76) "Never claimed it was a science, but it is the one we use and it seems to prevent the worst errors and provides a reasonable yield. There is no science, in the sense of a methodology based on any deep understanding of the way things work. It is a misunderstanding to call it a science, a bit like economics!"

    No. Actuarial judgment (over clinical judgment - see Groves on Meehl) has a sound history in both behavioural science and medicine. It's part of 'evidence baded practice'. I know how this came about in the UK at least. It is Frequentist not Bayesian. It is not gambling/betting. Risk assessment was misappropriated/misapplied by Financial Services in recent times. The language was appropriated as sales spin. For an example, see Credit Ratings, an instance of clinical judgment masquerading as actuarial judgment.

  • Comment number 82.

    ishkandar (#80) "Currently, artificial intelligence is about on par with military intelligence - an oxymoron !!"

    Yes.

    This is because a) AI misconceived what intelligent behaviour comprised, and b) the three fathers of AI in the 1950s were cognitivists and thus had a scotoma in common.

    It's worth looking into, as it's at the root of many problems discussed in these blogs.

  • Comment number 83.

    Jericoa (#72) "JJ takes on the manor of a patient teacher surrounded by petulent students whom he has a duty to educate... yet blind himself to the effect he has on others..."

    I certainly have something to teach you (and several others here) as it's obvious to me that you believe a lot which is factually untrue and are not aware of much which is factually true.

    I am also aware of the way in which some find it very difficult to learn without having tantrums. That is one of the things I am trying to teach you and several others here, as this disposition has a direct bearing on the economic crisis given our demographics. I fear it may be genetic however.

    "The goal in life should be happiness, happiness is not related to IQ or genetics."

    No, that's hedonism, and it's one of those ill-conceived, self-destructive notions which have been peddled by those who have helped bring about the current economic/social crisis. How rewards and punishments control behaviour is very much related to IQ and genetics. Rewards are things people learn about however, they are not coextenive with reinforcement. See the brain monoamines, endogenous opioid peptides, and how their receptors/transporters etc function as a consequence of genetic variation/individual differences.

    I suggest you have a look into what life is actually about as revealed by research into the above instead of telling people what you think it should be about.

    You are, it would appear, still too fond of magical thinking, and far too averse to taking helpful instruction. This is a helpful post, try to be grateful for it.

  • Comment number 84.

    #65 Jadedjean You appear in danger of being hoist by your own petard, and engaging in magical thinking. John_from_Hendon may very well be describing betting/gambling, but the charge against Goldman is that of market manipulation.

    For market manipulators (should they exist) no gambling is involved since they know the answer ahead of time, and hence just hoover up all the losing bets made by others who did not know the answer ahead of time.

    I think you will find that hedonism is normally defined as relating to pleasure, not to happiness. The two words (pleasure and happiness)are different and it therefore follows that they have different meanings.

  • Comment number 85.

    armagediontimes (#84) "I think you will find that hedonism is normally defined as relating to pleasure, not to happiness. The two words (pleasure and happiness)are different and it therefore follows that they have different meanings."

    Same vs different.. who defines the 'meanings' of folk psychological terms? Do you think you know what you're talking about here? If so, how do you know? Are there different entities because there are different words? Do you know better than the people who research this sort of thing (cf. Behaviour Analysis), because operationally this is pretty well understood, you probably just don't know about it.

    People talk of all sorts of 'mental entities' without knowing what they're really talking about, they just collude in ignorance. They're as bad as economists and the shrinking Wicked Witch of The West. Their ignorance shows up in their love of fan charts.

    A helpful suggestion or two:- first, you don't appear to have been doing any of your austere homework. As a consequence, why do you expect to be able to keep up? Second, look into the ETS stuff very carefully.

  • Comment number 86.

    jj

    "This is a helpful post, try to be grateful for it."

    How arrogant and downright rude. You may think that you are right but you certainly have no ability to teach as this process has to start with respect for both teacher and pupil. Arrogance is an element of disrespect.

  • Comment number 87.

    foredeckdave (#86) "How arrogant and downright rude."

    No, just forthright, honest and informative. Get used to it.

    "You may think that you are right"

    No, I have a major advantage over you. I know my material. I know that I am right.

    "but you certainly have no ability to teach as this process has to start with respect for both teacher and pupil."

    No, it just requires someone to presemt the facts and have people who can benefit from see them. That is what I am doing. What we see from some here is an inability/reluctance to learn. In children it's called Oppositional Defiance. This happens. These people serve a useful function too. You need to be careful about representativeness, as people who do learn will rarely post to say so. There's a bias operating here. I know that, you and several others don't.

    "Arrogance is an element of disrespect."

    Except I know what I'm talking about, you should know that by now. Your arrogance on the other hand is certainly indicative of lack fo respect, as well as lack of knowledge.

    If you'd followed up the links witb some respect/humility you might have learned something. What we're seeing here from some is a group of like-minded people being flushed out, which is what I intended. It illustrates precsely how we get into socio-economic messes like the current one. Think of yourself as a star in this instantiation.

  • Comment number 88.

    #52

    galnny glanny glanafon!

    It's not a matter of facing the wrong way. It is a matter of continuing to THINK the wrong way.

    We have created (or allowed to be created) a society that no longer understands value and its relationship to wealth. Don't look at the tangible comptitive world, look at the whole world of finance. If we are honest with ourselves for a moment we have to accept that this industry has moved itself further and further away from reality. Despite its sef-vaunted expertise and sophisticated models and systems it is truly sophistry. Until the present system collapses there will be no improvement.

    At its simplest the real economy is controlled by relatively equal competeing forces acting as checks and balances. However, now the rich have over-ridden those checks and balances. This has led to a situation wherein the rich have increased their money values to such an extent that there is no longer a true relationship with any physical assets. Until money is forced (and it will have to be forced) back into its true position in the economic jigsaw then their can be no positive political or economic planning.

    However, it is still possible for the governments and people to regain some form of control and that is via a European protectionist policy.

  • Comment number 89.

    #86

    JJ is the blogging equivalent of Gordon Brown, a lone voice in isolation, convinced of his own value despite the fact that the vast majority of people here take issue with his postings. Postings which often only escape being extremely offensive by virtue of the disguise of the scientific language he uses to 'instruct us' poor uneducated souls unfortunate enough to have the wrong 'jeans' to meet his required IQ standard to fix the world.

    JJ may I direct you to attend a gospel choir on a Sunday in Harlem in order to help you understand, just consider it research, any good scioentist must explore both sides of the argument thouroughly must he not to have credibility?

    How such a gathering of gospel singers can be described as 'hedonism' by JJ merely shows how afraid of it he. Afraid to confront the error of what must have been many years dedicated to the pursuit of proving scientifically that IQ and behaviour is related to ''genetics'' you could call it race of course instead of genetics but the moderators would wake up at that point and pull the post...so he doesn't.

    It is rather annoying, but we should be kind to him, he still has a chance to learn from us all and see the error of his ways.








  • Comment number 90.

    #85 Jadedjean In common with most of the rest of the population I am happy enough to along with dictionary definitions. From your comments it would appear that a dictionary falls someway short of your requirements.

    Going to war with the dictionary may or may not be intellectually pure, but it could engender certain communication difficulties.

    As for ongoing adulation of Quine can you tell me who described his thesis in the following terms:

    "Quines thesis of the indeterminacy of translation amounts to an implausible and quite unsubstantiated empirical claim about what the mind brings to the problem of acquisition of language (or of knowledge in general) as an innate property"

    Perhaps you could let me know if the writer of the foregoing is generally recognised as being a world leading expert in his field.

  • Comment number 91.

    sashaclarkson # 55

    "If you want an approach to economics which promotes gradualism where possible to minimise pain, but seeks the greatest good of the greatest number, then read Keynes and his followers like the Galbraiths (father and son) and Krugman."

    This is just the kind of advice we do NOT need! Keynes's wacky economic theories were thoroughly discredited during the 1970s period of stagflation. Even Jim Callaghan had to admit that one cannot spend one's way out of a recession/depression.

    And so-called economists like Paul Krugman have completely lost the plot! Krugman estimated that the "spending hole" that needs "filling" in the US economy is $2.9 trillion dollars. Because of that, he complained, President Obama's stimulus package ($789 billion) should be over three times is present size!

    "It's helpful, but it does not cover even one-third of the gap, so it's disappointing," Krugman said. Out of the $789 billion approved, only about $600 billion adds real stimulus, in Krugman's opinion. "So you've only got $600 billion to fill a $2.9 trillion hole."

    The only hole that needs filling is the one in Krugman's understanding of economics!

  • Comment number 92.

    #91

    Hi Kurt,

    Not so sure about your post here. I understand that it runs contrary to your economic beliefs but I think you have to respect sashaclarkson's intentions in giving the advice. Now you can always feel free to add your own readings to those suggested?

    Ever stop to think that Krugman might be right? At least he has been consistant. He said TARP was insufficient and mis-directed and then he said the Obama package was too small.

    It's only money and Warren Buffett can afford it :)

  • Comment number 93.

    Jericoa (#90) "a lone voice in isolation, convinced of his own value despite the fact that the vast majority of people here take issue with his postings."

    Those 'taking issue' are demonstrably ill-informed and incorrigible, are they not? In fact, they're making themselves look even more so given the evidence available but persistently ignored, don't you think?

    Aren't people odd?

  • Comment number 94.

    JJ

    The legend of his own imagination.

    Google Beatles and hill

  • Comment number 95.

    foredeckdave # 92

    Dave

    "...but I think you have to respect sashaclarkson's intentions in giving the advice. Now you can always feel free to add your own readings to those suggested?"

    Hmmm...perhaps I was being a tad hasty; maybe people should go and read Keynes's magnum opus: The General Theory of Employment, Interest and Money (1936) and then afterwards read Hazlitt's: The Failure of the "New Economics": An Analysis of the Keynesian Fallacies (1959) - my suggested reading!

    "Ever stop to think that Krugman might be right? At least he has been consistant."

    Never; he is and always will be consistently wrong! Any economist who wholeheartedly supports a statement like this...

    "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."

    ...is as wrongheaded as the man who wrote it; i.e. Keynes himself. Krugman likes to think of himself as our "saviour", and like a saviour he will perform a miracle for us: that of turning consumption into wealth. But who would accept a messiah with such a John the Baptist as John Maynard Keynes, who proclaimed that credit expansion could perform the "miracle...of turning a stone into bread"? In any case, Krugman is a curious kind of saviour: one more interested in exercising his brilliance than in actually helping people. In the Newsweek profile, he said of his policy advocacy:

    "I am not overflowing with human compassion. It's more of an intellectual thing."

    http://krugman.blogs.nytimes.com/2009/04/14/time-for-bottles-in-coal-mines/




  • Comment number 96.

    CHINESE WHISPERS AND GAVAGAI (INSCRUTABILTY OR REFERENCE)

    armagediontimes (#90) Dictionaries merely record popular usage, this lags behind science. Science ignores dictionary usage.

    Do you have any grasp at all of how often people 'report' what other people allegedly say, think or believe (substitute other intensional (mentalistic/psychological) idioms/verbs of propositional attitude), whilst substituting what such people actually say, think or believe, with something which the 'reporter' thinks 'means the same', whilst still asserting that the substitution is what the person actually said?

    You appear to have no idea as to the scope/extent of the problem. When the magnitude of this dawns on you you might start to write differently, as you'll start to understand the extent to which you, like many others, unwittingly indulge in irrational creative writing (fiction), distortion and spin within a closed intensional circle of your own making, which is resistant to rational analysis, as this depends on preservation of logical quantification-in (the sine qua non for logical inference), the preserve of extensional contexts).

    Note: If one doesn't understand something, it doesn't mean it isn't the case, it just means that one is unaware of something. Despite modern Liberal-Democratic obsession with narcissism, tragically, we are not omniscient (see Oedipus and Jocasta). This explains a lot that is wrong with C20th economics and much else besides.

    You need to take this seriously, as you've shown me, at least, that you do not understand.

  • Comment number 97.

    foredeckdave (#94) You still don't understand that truth is not personal. It's sentential, disquotational and referential.

    You don't understand the nature of the ad hominem either or you wouldn't write the way that you do.

    Truth and celebritism/narcissism don't mix but you don't see why. This is why you don't understand what I post. You are not the only one, but then, that's largely what I hope to show to others to explain our predicament.

  • Comment number 98.

    #96 Jadedjean. I suspect dictionaries do rather more than record popular usage. This would explain why dictionaries contain words such a "bachycephalic" which hardly crops up in every day conversation, and, so far as I am aware, has substantially no popular usage.

    I don´t think science ignores dictionaries. Think of all the problems that scientists would run into; one scientist says "can you open the door?" the second scientist responds by killing a chicken. Where would it all end?

    Simple recourse to quotation marks is ordinarily sufficient to signify a direct quotation, and similarly their absence is sufficient to indicate "substitution."

    Maybe language is much more straightforward than you think.

    Do you know the identity of the person who described Quine´s thesis as "implausible" and "unsubstantiated"? It seems to have a ring of truth about it to me.





  • Comment number 99.

    Jadedjean

    "You still don't understand that truth is not personal. It's sentential, disquotational and referential."

    What you do not understand is the meaning of truth. You have shown time and time again that you will not accept the proven truths of the Holoucast and yet you still hide behind your cloak of empirical truth.


    "No, I have a major advantage over you. I know my material. I know that I am right."

    Hear we have yet another falicy stated as fact. There is absolutely no way that you can know your material,the absolute best that you can say is that "I think" or "it appears". Therefore you cannot know that you are right.

    From the many many posts on these blogs proveing the inadequacy or incorrectness of your statements we can safely presume that you do not know your material as knowing involves understanding. It is very clear that your understanding of history, economics and politics is incredibly flawed. It is even fair to say that your knowledge of sociology and psychology, indeed of the human condition, is incredibly flawed - hence your unsubstantiated rejecion of any cognitive understanding.

    Given the above my charge of arrogance based upon ignorance still stands.

    In your words - "GET USED TO IT"

  • Comment number 100.

    #88 "At its simplest the real economy is controlled by relatively equal competeing forces acting as checks and balances. However, now the rich have over-ridden those checks and balances. This has led to a situation wherein the rich have increased their money values to such an extent that there is no longer a true relationship with any physical assets. Until money is forced (and it will have to be forced) back into its true position in the economic jigsaw then their can be no positive political or economic planning."

    This is so true !! We need to re-gain the true value of money !!

    "However, it is still possible for the governments and people to regain some form of control and that is via a European protectionist policy."

    But protectionist policies are yet another method of artificially manipulating the value of money !! By artificially pricing goods through such protectionism, you are, in effect, making a temporary defence of local production. However, without local sources of raw materials, such policies will result is counter-protectionism and the rise in the cost of raw materials, and thus the spiral goes, ending in one or both parties being economically destroyed to the glee of those watching in the sidelines !! Therefore, you will destroy *that* which you hope to protect !!

 

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