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When the G20 stopped feeling like the G8-plus

Stephanie Flanders | 22:07 UK time, Sunday, 14 November 2010

Western officials should have realised this summit would be different when they arrived in Seoul to find their smartphones didn't work. The problem was that Korea's nationwide 4G network was too advanced. On early negotiating missions, key UK officials found themselves communicating with London via e-mail, on rented phones.

Obama

President Obama in Seoul

That was never a problem in Pittsburgh, or in Toronto. But as George Osborne liked to point out, this was the first G20 summit not hosted by a G8 country - and, he might have added, the first where G8 countries didn't call the tune.

As we know, there was vanishingly little progress on the debate of the hour - the question of global imbalances. China is going to open its economy and take on more of the burden for sustaining the world economy. But it's going to do it in its own time, in its own way. And that includes raising the international value of its exchange rate.

America isn't helpless in this battle. Far from it. The US controls the only truly global currency. And its central bank will print a lot of it, if it has to, to keep the American economy going. But, as I said last month, this battle over the Chinese exchange rate may be the closest we have seen to a fair fight between America and another nation for a very long time.

China has spent $2 trillion in the past decade keeping its exchange rate at a competitive level, and there's plenty more where that comes from.

It wasn't just currencies. The development agenda tilted eastwards at this summit as well. As far as China, India, or Korea are concerned, no-one ever got rich following the old-style Washington Consensus of the World Bank and IMF: Africa, least of all. The way they see it, Asia is where the really big falls in poverty have all been achieved - and that didn't happen by playing Western rules.

The Washington Consensus has been dead for a while, or at least under serious review. But the "Seoul Consensus" that the G20 signed up to this week made it official. And there were Asian fingerprints all over it.

In the communique, the leaders also agreed that "innocent victims" of the currency wars - countries whose exchange rates were getting pushed up for no good reason - might be right to impose formal capital controls. That's the final nail for another G8 taboo.

I remember back in the Asian financial crisis, in the late 1990s, when Malaysia resorted to widespread capital controls to protect their economy. It became a pariah - at least in IMF circles. But most of the fast-growing Asian economies have limited capital inflows for years - and after this latest turbulence, they're planning to regulate more in future, not less. Like it or not, the IMF and the G20 are catching up with reality.

It's too soon to call the end of America's hegemony over international summits. The US will be the largest economy in the world for a few years yet. I suspect US presidents will continue to set the agenda, long after it slips to second place - if only to give the others something to pick apart.

But this may go down as the summit where China said no to the US - and where the G20 stopped feeling like the G8-plus.

Like the global economy, this new G20 has a different balance of power. It's more diverse. More fractious. And it's not a little disconcerting to the old guard. Just don't expect Nicolas Sarkozy to admit it, when he chairs the G20 next year.

Comments

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  • Comment number 1.

    From todays Sunday Telegraph:-
    "That said, the dilemma is actually pretty simple. In an ideal world, one would like to have fixed exchange rates (so that companies can trade internationally without worrying about currency movements), free movement of capital (so investors can put money where it’s most needed) and independent domestic monetary policy (so you set interest rates dependent on how fast or slow your economy is growing)."

    Fixed exhange rates will doom us to repeat the mistakes of the first 50 - 60 years of the 20th Century. Please do read about the straight jacket we would be in, even if you think the Gold Standard is the best thing since sliced bread. Remember the ERM and Norman Lamont; what a disaster! We need new policies but not this. Please read, learn and think.

    Business is important - yes. People are more important. Policies developed since WWII have been progressively more and morre business-centric. Now we are in a mess. Policies are needed that put people first and business then needs to work within the context set. The belief that business has the answer is, I regret, wrong. They just want a healthy bottom line and large payouts for the few. What they fail to realise is that spending=income. Many people spending a little in today's populous world will give industry far better returns than the few rich spending a lot.

  • Comment number 2.

    #1 SleepyDormouse wrote:

    "Fixed exchange rates will doom us to repeat the mistakes of the first 50 - 60 years of the 20th Century."

    But, when the G200 agreed (sort of) not to engage in competitive devaluation that is (more or less) what they agreed!

    The conclusion can only be is that the amateurs don't understand much about economics and we, as a World, put far too much faith in their knowledge and skill!

    It is my opinion that, for stability and reasonable harmony, we, as a planet, need to re-develop an economic system that places the equal value of each individual's labour far higher up the agenda than it is today.

    This leads me to seriously suggest that David Cameron's suggestion that bosses' pay should be limited to 20 times the lowest paid employee is about the only viable way ahead. (But I do also concede that even the most supposedly left wing govenrment have not achieved this!)

  • Comment number 3.

    PS I am also pleased to see that the re-introduction of Exchange Control is no longer off of the agenda (see Stephanie above)!!!!

  • Comment number 4.

    Here is Joseph Stiglitz: "0n September 7 1998 in a now-famous column in Fortune magazine, the noted economist Paul Krugman urged Mahathir to impose capital controls. But he was in the minority...My team at the world bank worked with Malaysia to convert the capital controls into an exit tax."
    Now, here is Krugman blog 15 March 2010: "The bottom line in all this is that we [the US] don’t need the Chinese to keep interest rates down. If they decide to pull back, what they’re basically doing is selling dollars and buying other currencies — and that’s actually an expansionary policy for the United States, just as selling shekels and buying other currencies was an expansionary policy for Israel (it doesn’t matter who does it!).
    As Dean nicely puts it, “China has an unloaded water pistol pointed at our heads.” Actually, it’s even better: China can, if it chooses, throw some cold water on us — but it’s a hot day, and we would actually enjoy it."
    As Krugman keeps saying, all he does is use the New Keynesian model.

  • Comment number 5.

    Stephanie's article above should make it clear that now the West will not have it all its own way and there will be a need for the nations to cooperate to reach viable solutions. The trouble is that there is likely to be no agreemant on what constitutes a viable solution. There is no speedy mechanism in existence to even try to agree, as far as I can see. The politicians are ceding the right to determine events to the market place, just where it should NOT be. The markets will decide and then leave politicians with ever decreasing options while they jet around trying to find an agreeable way forward.

    Debt is at the centre of this storm. So far, I suspect our leaders are working hard, but are reducing their freedom for manoeuvre and turning it into a perfect storm which many, quite literally, may not survive. I am beginning to think that the losses of the banks will have to be realised. We are trying to paper over the cracks with QE, but this isn't working as the government is providing money to organisations who don't want to spend it for the public good. Money is needed in the hands of the people, so our government should be spending the billions of QE money in keeping the public sector going. Banks may fail; OK - nationalise them and keep them in public ownership for as long as necessary for them to be healthy. [Then if you must sell them off at a really good profit - not at giveaway prices]. Once the money is in the hands of the people, the non-government sector, business will pick up as the money is spent. The government will get it all back as it levies taxes. Keep the money spent within an amount set by the productive capacity of our economy and inflation will be kept at bay. This would start the change from our current debt based economy to a more sustainable way of life.

  • Comment number 6.

    2. At 10:06am on 14 Nov 2010, John_from_Hendon wrote:

    "#1 SleepyDormouse wrote:

    "Fixed exchange rates will doom us to repeat the mistakes of the first 50 - 60 years of the 20th Century."

    But, when the G200 agreed (sort of) not to engage in competitive devaluation that is (more or less) what they agreed!"

    --------------------------------------------
    There is, to me a world of difference between the current G20 fudge and a firm fixed exchange rate agreement, like going back to the gold standard [or some surrogate].

    Also, sorry, but I just don't believe them. At the moment, self interest and winning elections will trump the words from Seoul. Carrying on as we are is the 'muddle through' option. Our economy has a lack of demand and this lack will be all the greater because of the way the UK has structured its cuts. We know there are 4 years worth, but we don't know how they will be implemented. We will also be fearful that, if they aren't quite working, then we will get more. Sensible people will be saving and paying off debt causing more of a slump in demand. This introduces that most contagious feeling - FEAR. Government policy maximises fear; it should be trying to minimise it. Too late to go back now without a reversal in policy - I can see PIIGS flying over to drop their lessons [that we shouldn't listen to as our currency is different] into our mess.

  • Comment number 7.

    Some good blogs above plus an absence of the tired old free market clichés and endless talk of Micawber moneynomics as the cure all for the economy's distress. Big business does not believe in the holy grail of free market economics or the conventional theory of international trade - their concern is planning, control, politics and the occasional bit of collaboration. The USA trying to hector up the Yuan is futile.

  • Comment number 8.

    The influence of China and the rest of Asia is being overdone - deliberately?
    The crude GDP figures for 2009 as reported by the IMF are (in Trillions of US dollars):
    Total world 57.8
    EU 16.4
    US 14.1
    Japan 5.1
    China 5.0
    Brazil 1.6
    India 1.2
    Russia 1.2
    South Korea 0.8
    ROC (Taiwan) 0.4
    So between them the US and EU still comprise of over 50& of world GDP.

  • Comment number 9.

    8. At 11:45am on 14 Nov 2010, pharmaboy wrote:

    The influence of China and the rest of Asia is being overdone - deliberately?

    -----------------------------

    These are snapshot figures. I suggest its the rate of change and the trend that's important now.

  • Comment number 10.

    #6. SleepyDormouse wrote:

    "Government policy maximises fear; it should be trying to minimise it."

    That shocked me too - but I think it reinforces the amateurish and generally incompetent way that the new set of amateurs are approaching the economics problems. I also find it surprising that the new bunch cannot understand that it is impossible to carry on as if nothing has changed in regulation. The direct implication of this is the existing Permanent Govenrment of the Treasury and the Bank of England/FSA have total sway over common sense and are getting away with their own incompetent previous management of the economy - they collectively caused the crash but they have not been sacked as they should have been!

    'Interesting times' I an afraid as those in change haven't a clue! Their actions, as you rightly say could hardly be more calculated to maximise fear and that inevitably will lead to the slump that most parts of the economy are now expecting. (Even if they dare not put it in their forecasts!)

  • Comment number 11.

    If China is going to open its economy and take on more of the burden for sustaining the world economy (as I think China will), I see absolutely no problem in China doing so at its own time, in its own way, even if that includes raising the international value of its exchange rate.
    What path would we want China to follow - Myanmar, the American Way, perhaps best of all - Great Britain?
    America is not totally helpless in this battle, but it is fading fast. If has limited go9ld reserve, it will plummet.
    The US may control the global currency at this moment, but it is fiat money, no value-backing; in short, it is paper. The United States will print, and keep printing until the American dollar is worth less than a Mexican peso.
    As for the FED, who knows what its really up to. It's never been audited, never been held accountable. The System refers to the US Federal Reserve Bank AS WELL AS THOSE BANKS THAT OWN THE FEDERAL RESERVE ITSELF.
    The creation of the Federal Reserve has proved to be one of the most ugly events in economic history. The Federal Reserve has resulted in the massive accumulation of wealth in the hands of a small number of individuals, financial institutions and corporations whose combined power allows them to manage control of the US AND THE WORLD ECONOMY, and in turn to exercise so much leverage that it is the de facto American GOVERNMENT.i.e. The world is in the hands of a small oligarchy, a plutocracy. The US Central Bank has a monopoly on the issue of currency.
    Pressure for a US Central Bank was building up around the turn of the In 1908 was the year: President Theodore Roosevelt, responding to continuing instability of the US monetary system and to LOBBYING by influential bankers, set up a commission which eventually led to The Federal Reserve (1913). What is the Federal Reserve:
    - the 5 main New York banks as well as
    - the Bank of England whose shareholders owned the majority of the stock of the New York banks.
    Therefore, the Federal Reserve is a cartel of private banks, of which the Bank of New York is the most powerful. This Federal Reserve cartel is nominally controlled by the government-appointed Federal Reserve Board, which is another way of saying the PLUTOCRACY controls it.
    So the Federal Reserve effectively buys government securities with paper that is not really money. Bankers will refer to such transactions as "magic". This "magic" is (or would be) illegal if practised by private enterprise. The Federal Reserve is NOT part of the Government, except for its name.
    So it's little wonder to me that China, India, or Korea are concerned, no-one ever got rich, or even benefitted, following the old-style Washington Consensus of the World Bank and IMF. Asia is where the really big falls in poverty have all been achieved - and that didn't happen by playing Western rules. Right on!
    Like it or not, the IMF and the G20 are catching up with reality: the American KING is wearing no clothes, and they are no longer afraid to say so.
    The US will NOT be the largest economy in the world for much longer. It's ability to ride the Federal Reserve will falter because there is no value - just lending, "money" creation, inflation, and in the long-run (short-run?) rebellion and rioting.
    The US Presidents will NOT continue to set any agenda, long after it slips to second place because the United States of America, when it plummets, will pass second, third, fourth, fifth place so fast, landing God knows where.
    Monetarily-speaking, the next few months should be very interesting, but mostly frightening...The United States simply must get rid of the Federal Reserve and restructure its entire economic system.

  • Comment number 12.

    Has anyone ever not come out of a meeting with China where China has not won?

    For hundreds, if not thousands of years - whilst Europe was still feudal and America was an unknown continent (at least to the rest of the world), China was the most powerful nation on earth. (And, because of its border geography, it was easily defined). They invented, they traded and their laws, monetary, mercantile and civil, were obeyed by all other countries or states able to be in contact with them. They always won.

    All that changed, as their leaders became more degenerate; then became more introspective. China was brought low, in world terms.

    What we are now seeing, perhaps, is their revival. Yet, despite all of the massive political and other changes they have undergone, they appear not to have lost their "inscrutability". The West is going to have to get used to China doing what China wants to do, when they want to do it.

  • Comment number 13.

    12. At 3:34pm on 14 Nov 2010, frenchderek wrote:

    What we are now seeing, perhaps, is their revival. Yet, despite all of the massive political and other changes they have undergone, they appear not to have lost their "inscrutability". The West is going to have to get used to China doing what China wants to do, when they want to do it.


    Well there are a lot of them. And when you add smart, educated, focussed into the mix the West has a problem.

    Or is it a problem or an opportunity to re-invent ourselves.

    A shift in the balance of power to the east is a breath of fresh air and welcome.

    Worry not about China start worrying about those clowns the ConDems.

  • Comment number 14.

    11. At 2:42pm on 14 Nov 2010, BluesBerry wrote:
    "The United States simply must get rid of the Federal Reserve and restructure its entire economic system."

    It's been...what...nearly 200 years. Why the hurry now? The party's over.

    "Monetarily-speaking, the next few months should be very interesting, but mostly frightening..."

    Yes. Despite China's suggestion that they will proceed slowly (and they have that luxury regarding their own reforms) here in 'The West' events are set to proceed somewhat more quickly and hence in a more disorderly manner. My personal deadline: April-July 2011.

    12. At 3:34pm on 14 Nov 2010, frenchderek wrote:
    "The West is going to have to get used to China doing what China wants to do, when they want to do it."

    The 'West' needs to start taking control of it's own future instead of waiting for someone else to do it for them. It's a bit late to make a start on the overpaid, the overindulged, the incompetent, the greedy, the liars, the thieves, the cheats, the pals, the boneheaded. They've bolted and left behind a vault full of unsigned IOUs. The political and economic focus since 2008 has been yet more introspection i.e. damage control with old bandaids. Needless to say, whether we are ready or not it will change from ~mid-2011.

  • Comment number 15.

    I believe that the US and a few other countries are facing a perfect storm. Printing money in the hope that this will cure the structural and cultural problems deeply embedded in the financial psyche is an illusion. Helicopter Ben and his acolytes may boast that they can produce money at no cost - so what! If I want paper, I'll get a ream of A4.

    Why can't they understand that it's not the paper that people desire, but the implicit guarantee that it represents a store of actual wealth. And you create wealth by producing goods and services that other peoples need, not indulging in the latest financial wheeze.

    We've had 12 months of this nonsense and what has changed? - not a lot!

    Surely it's time to sort out the whole dysfunctional system and get rid of the speculative mindset that got us into this mess in the first place.

    By the way, I notice that the stock markets have roared ahead this year. I must be wrong...

  • Comment number 16.

    When there is a change in world leadership, according to Huntingdon – Clash of Civilisations, there is often a war. Unusually, this didn't happen when GB relinquished the role to the USA. I would pray that, should there be a change, it is again peaceful.

    The question for me is how will the UK maintain its economy through these difficult times. It seems inescapable to me that, if there are a large number of unemployed, they are unproductive. The total output of the UK as measured by its GDP will be less than it could be. This seems to me to be a permanent loss to the UK. The first paragraph above is very significant:
    Western officials should have realised this Summit would be different when they arrived in Seoul to find their phones and blackberrys didn't work. The problem was that Korea's nationwide 4G network was too advanced. On early negotiating missions, key UK officials found themselves communicating with London via gmail, on rented phones.
    Perhaps a minor thing, but indicative of their pace of change. Technology leaders can set standards for others to follow. We need as productive economy as possible to keep up. We do not have huge natural resources to exploit, we just have our wits and inventiveness. Our government policy on education is bound to affect adversely the numbers and range of teenagers seeking tertiary education.

    We need a reversal of policy on the funding of students. They are our future. They will provide the growth needed for our economy to be maximised. Just because they have better future prospects to earn more, they are being asked to take on debt. We can see all around the tremendous disadvantage of debt. So why are we doing it, when all we are doing is mortgaging our country's future for a political point to be made? Its crackers! Just remember, spending=income. At the moment, government policy seems to be 'no spending= no income' result a declining economy, influence and the ability for the UK to have any control at all over our own country's future.

  • Comment number 17.

    During my nearly 60 years, we in the west have been able to pat ourselves on the back and claim our economic superiority and our largely democratic political culture and institutions have formed a virtuous circle - each promoting the other, neither capable without the other.

    Of course, a brief analysis of economic growth in the western democracies reveals an ever greater reliance on the productive capacity of other nations around the globe where unit costs are substantially lower than at home, and democracy may, or may not, be thriving. A deeper look at why unit costs are lower often reveals a workplace environment that would be totally unacceptable to us in the west. But as a blue chip director once pointedly said to me, a business is not a democracy, and long may it remain so.

    Consequently, we in the west with our "morals" and "ethics" are left wondering why it is that we who are virtuous are losing ground, whilst those in the growing Asian economies, whose political systems are less developed than ours, steal a march on us? It poses the question, will greater prosperity bring greater political freedoms and civil liberties for those in the developing world - bringing them inline, say, with the west - or will these economies cherish their economic cost effectiveness, and growing wealth and influence, and develop their political systems in a way similar to China?

    The argument for engaging with China, both politically and economically, is predicated on the notion that a greater level of global involvement, and hence interdependence, would reap the joint benefits of opening up a huge market for our goods, and moderating a highly autocratic political system that carried a real threat to world peace (and indirectly global economic prosperity).

    However, with the current success of China and its geographically proximate economies, the question might be asked - why do we need lectures from the old and failing west on how to behave and organise our civil societies when we are enjoying such spectacular success? Taken in conjunction with my earlier comment on the incompatibility of business hierachies and democratic ideology, how long before big business picks up its HQ and moves it east.

    We in the west are then left with the dilemma, do we cherish our democratic institutions and refuse to compromise - even if it means we sink beneath the waves - or do we adopt more of the methods and techniques of the less democratically developed nations in an effort to remain economically competitive, or at the very least ensure our very survival?

    The potential loss of US preeminence will not have even occurred to most US citizens as a possibility, let alone the wholesale shift of global economic dominance moving east. We in Europe have had the greater proportion of the 20th century to get used to the idea of our diminished status - both economic and political - and are consequently less bellicose. Not so in the the hearts and minds of US citizens where the image of an all bestriding all conquering global superpower will not be foresaken lightly, especially in the corridors of power - and therein lies the worry for the rest of us. How will the US adjust to its changing status, and relatively diminished influence and importance? We in Europe kicked off two world wars as we declined, lets hope the US have learnt from history and not repeat our mistakes.

  • Comment number 18.

    No. 17:

    Thanks for a thoughtful post!

    Regarding the US, maybe its citizens now realize just how badly they have been led - both politically and economically. Despite the rearguard action now being employed, it seems fairly clear that the old order is about to be swept aside.

    Mr Market may well have to give way to Mr Blue Collar. And rightly so!

  • Comment number 19.

    Lessons from history

    Thanks to the comments above, especially BureBerry, I read up a little in wiki about the Federal Reserve and the Bank of England.

    The Bank of England was created after the Battle of Beachy Head as the English gov of the time needed to build a powerful Royal Navy, but had no money to do so. The consequence of that was: a powerful navy, industrial and agricultural development, the growth of the British Empire, and perhaps even the industrial revolution.

    For me, the lesson is that the real wealth comes not from printing money, but from using it to produce goods. The only element in GDP that counts, long term, is industrial production. That’s why China can more than punch its weight.

    We have to do everything to revive our manufacturing. One important step in that, as SleepyDormouse has already said, is to give our young people the best possible education. Certainly don’t strangle the young with the most stupid educational mortgage scheme ever conceived

  • Comment number 20.

    #19. WolfiePeters wrote:

    "...build a powerful Royal Navy, but had no money to do so"

    So they offered bonds that paid 8%. The BoE or later the Treasury have never offered less that 2.5% so far as I can trace until NOW. In other words the economic calamity we are still entering is a once in 300 odd year disaster.

    The Bank/Treasury has to be stopped destroying money for several generations! Their short term QE / Printing of Money policies and zero interest rates will destroy the whole Nation's economy for twenty years even if they stop NOW. If they carry on any longer it may be thirty years before we can hope to see a viable economic system. The Bank's / Treasury policy is economically illiterate and I think they know it!

  • Comment number 21.

    20. At 7:08pm on 14 Nov 2010, John_from_Hendon wrote:

    The Bank's / Treasury policy is economically illiterate and I think they know it!


    Indeed they are.

    But whats a 'policy chap' to do except come out with policies.

    Never mind the quality feel the width, etc...

  • Comment number 22.

    No. 20:

    Given the accepted Central Banker wisdom, perhaps we should specialize in the production of faster printing machines.

    There seems to be a demand for them at the moment...

  • Comment number 23.

    #16 "When there is a change in world leadership ... there is often a war. Unusually, this didn't happen when GB relinquished the role to the USA."
    Of course it happened ... in two instalments, 1914-18 and 1939-45. Or if you're American, 1917-18 and 1941-45.
    Even though it was Germany and Japan that surrendered, still with hindsight the UK was the biggest loser. In 1914 Britain was the world superpower. By 1945, although on the winning side, Britain was exhausted and broke.

  • Comment number 24.

    23. At 7:44pm on 14 Nov 2010, malocao wrote:
    ---------------------
    The war Huntingdon was writing about is war between the current lead power and the potential leader. In this case it would be war between USA and UK during the transition period post WW1. I suggest it didn't happen. Other wars, as you so rightly point out did. UK and US didn't fight each other openly.

  • Comment number 25.


    Please can some one explain the question after this simple scenario.

    A country has a fiat currency [issues its own currency and has a floating exchange rate] and a GDP of 1.4 trillion. The government takes 350 billion in taxes but has an expenditure of 400 billion. Unemployment is 10%. [Assume external trade is in balance]. The country needs 50 billion. It has 2 options:
    1 borrow 50 billion [for 10 years] and pay interest of say 3%. 1.5 billion per year until maturity, totalling 15 billion. Proably expect to use monetary measures only to control inflation.
    2 produce 50 billion by crediting the government accounts to allow the necessary expenditure and pay no additional interest. Use fiscal and monetary measures to control inflation.

    Bearing in mind that: there is an accounting identity that
    the government deficit (surplus) equals the non-government surplus (deficit) minus net exports

    Why is option 1 acceptable, whilst option 2 is denigrated as 'printing money' when fractional reserve banking allows banks to simply create money as they wish?

  • Comment number 26.

    #17 PaulRM,

    "We in the west are then left with the dilemma, do we cherish our democratic institutions and refuse to compromise - even if it means we sink beneath the waves - or do we adopt more of the methods and techniques of the less democratically developed nations in an effort to remain economically competitive, or at the very least ensure our very survival?"

    I truly believe that there is an answer to your question. It does not necessitate the loss of our democractic institutions or even our moral view of the world. It does require us to completely revise our economic systems and the institutions (particularly financial) that underpin them.

    It does mean asking some very fundemental questions such as "what is our economy for?" and "how should it be organised". These questions may appear to be simplistic but they are vital to our future wellbeing. The simple truth is that we have lost sight of the answer to the first question and therefore our present systems have been found wanting.

    In Europe the 'holy grail' appears to be identification and production of cheap sustainable power generation. This great question is too large for any one country to satisfactorally answer. Perhaps therefore, we have the opportunity for the EU to actually come of age and act as focus point for combined research. It cannot be left to the existing vested interests. As Europeans we have already proved that we can combine effectively - Airbus and CERN so it is possible.

    In Europe we have seen the greatest transfer of wealth from poor to rich. Now Pareto indicated in 1906 that if the ratio passed the 80/20 level then the long term consequences would be negative. This ratio is now well out of balance.

    I also agree with SleepyDormouse and WolfiePeters that we cannot afford to curtail spending on our educational programmes.

    So we've had work harder and work smarter and they haven't worked. It is now time to think more deeply.

  • Comment number 27.

    During my 3 years of university, without fail at least one my economics or finance lecturers, always of Chinese origin would mention the factoid: ‘The Chinese invented paper money'. And I always responded ‘And was wise enough not to teach us about inflation, they sure know how to use a good thing'. In the 1st year, there were the glum faces all around. The 2nd year; all my classmates just looked to me for the usual repartee. In my 3rd and final year, after I responded, they all burst out laughing.
    And now at South Korea, the others are still trying to teach the Chinese economics.

  • Comment number 28.

    #24 Sleepy,

    "UK and US didn't fight each other openly."

    Perhaps that was because it was it neither country's best interest to do so. You have to remember that even up to the 1930s, nearly 30% of US industry was either British owned or had large levels of UK investment. Now, those levels fell dramatically with the onset of WW2. Then UK power was reduced dramatically.

    One factor that really upset the USA was that they were not allowed free access to the British Empire. Although still not openly admitted by either government the true cost of Lend Lease was the acceptance by the UK that they would allow US firms into the Empire. We satisfy ourselves that the break up of the Empire was a response to democratic freedom. However, the real reality was that we no longer had an economic advantage - hence the cost of running the Empire became too high.

  • Comment number 29.

    Why is option 1 acceptable, whilst option 2 is denigrated as 'printing money' when fractional reserve banking allows banks to simply create money as they wish?

    Option 1 is acceptable because fractional reserve banking DOES NOT allows banks to simply create money as they wish?

    What happens is that it allows banks to leverage on the reasonable assumption that not every depositor will require repaying at the same time. That is what FRB is.

    Option 2 is denigrated as 'printing money' because that is what it does.

    Try not to make things unnessarily complicated because all that will happen is you will vanish up your own a...


  • Comment number 30.

    This is so drawn out, it's painful.

    The Asians are going to make a local equivalent of the EU, or the US, based on the Yuan. The result will be domestic demand for domestic produce. The trade imbalance will be thus reduced.

    The US can print what it likes - it will have no effect than to accelerate the decoupling from the dollar. What is absolutely essential is that those new dollars be spent wisely on new infrastructure that decouples the dollar from petrochemical energy.

    That is all that matters. I DO sincerely hope people fully grasp, understand, and appreciate that that is in fact the case.

  • Comment number 31.

    28. At 8:47pm on 14 Nov 2010, foredeckdave wrote:
    -----------------------
    Many thanks for your reply, its filled in some missing pieces. I was aware that relations between UK and US declined significantly during the inter-war years. One reason I read about for there not being war was the fact that we had a common language and the politicians at the time assessed that there would be no stomach for conflict.

    The chinese are learning english, many indians can speak it anyway. Perhaps chinese should be mandatory in all US schools from the age of 6.

    In the above comments, its assumed that the dominant power will be China.
    What about India?
    What about rising tension between India and China, possible trade disputes, sanctions and maybe even war between them?

  • Comment number 32.

    26. At 8:31pm on 14 Nov 2010, foredeckdave wrote:

    It does mean asking some very fundemental questions such as "what is our economy for?" and "how should it be organised". These questions may appear to be simplistic but they are vital to our future wellbeing.


    True.

    Unfortunately it has been answered by. It is for the 'Tory Boys' and their fag, little Nicky. How should it be organised ... 'unfairly'.

    Perhaps we should take a look at a proven economic model and copy.

    The Social Market Economy (not Socialist, FDD).

    "The term "social" is stressed because West Germans wanted an economy that would not only help the wealthy but also care for the workers and others who might not prove able to cope with the strenuous competitive demands of a market economy. The term "social" was chosen rather than "socialist" to distinguish their system from those in which the state claimed the right to direct the economy or to intervene in it."(https://countrystudies.us/germany/136.htm%29

    It is a stakeholder based economy, and has been very successful for over 60 years.

    The laissez-faire capitalism system adopted by the UK has not worked. In fact its only distiguishable feature is abject failure.

    Thatchers quip (it deserves no better term) that 'there is no such thing as society' could not be more wrong. There is and it is fundamentally important.

    The raucous cheering by members of the ConDems when each single cut was anounced on 20th October will stay with me for a long time.

    FDD, to labour a point, Social not Socialist, similar sounding words but very different.

  • Comment number 33.

    Good post Stephanie and some thoughtful comments. A few thoughts from me:

    1. It is a nice idea to talk of the "west" - for example as a counterweight to China - but it is misguided. For a start if you are sitting in Beijing you travel east to the US and west to Europe. More importantly it seems to me that the EU and America are moving further apart - witness the differences that have emerged on fiscal policy

    2.How will the US and the EU respond to declining power/influence and possibly also declining living standards. Will both turn inwards and will we see the rise of far right racist politics. The tragedy of this is that it may make it impossible to develop any sensible concerted policy to address the rise of China.

    3. I don't think it is right to talk about this conference as marking some sort of watershed in terms of a decline in the power/influence of the US and the EU. It has been obvious for some time it is just that it is only know that people in the EU and US have started to realise what has been going on.

    4. I suspect Sarkozy may have a real go at redesigning the global financial/political system during France's presidency of the G20.

  • Comment number 34.

    Just a technicality but there are no commercial 4G networks anywhere in the world.

    South Korea adopted the 2G CDMA system (as opposed to 2G GSM) now used be very few other countries in the world hence the need to rent a phone where 3G coverage is low.

    The first 4G commercial system is very likely to be in the US.

    It does so grate when the journalists mess up on basic technical facts especially when used to make a point....

  • Comment number 35.

    29. At 8:54pm on 14 Nov 2010, Richard Dingle wrote:
    Why is option 1 acceptable, whilst option 2 is denigrated as 'printing money' when fractional reserve banking allows banks to simply create money as they wish?
    ****
    Option 1 is acceptable because fractional reserve banking DOES NOT allows banks to simply create money as they wish?

    What happens is that it allows banks to leverage on the reasonable assumption that not every depositor will require repaying at the same time. That is what FRB is.

    Option 2 is denigrated as 'printing money' because that is what it does.

    Try not to make things unnessarily complicated because all that will happen is you will vanish up your own a...

    - - - - - - - - - - - -

    Many thanks for your reply, it is appreciated even though you present no real information as to the answer to my question.

    I find it interesting and passing strange all you can do is comment in the way that you do in your final sentence. I have often found that the best insights are to be found by asking questions, even where they seem obvious to many that are educated and know the subject well. I have never been lucky enough to spend time at university reading and learning about macro-economic theory. I have been taught to question, however, particularly things that seem simple.

    You are correct that there is a need for banks to have a reserve ratio. From the reading I have been doing over the last 5-6 months, I gather that banks make loans first and then ensure they have sufficient deposits to achieve the required ratio. The deposits may come from customers, interbank loans etc or if all else fail, they can raise the necessary finance from the BoE. Thus, banks can always make loans to creditworthy customers if they wish; the demand for loans of quality limits their money creating activity. There is no real constraint of consequence; however maybe there is evidence to the contrary .............

  • Comment number 36.

    33. At 9:16pm on 14 Nov 2010, Cassandra wrote:
    4. I suspect Sarkozy may have a real go at redesigning the global financial/political system during France's presidency of the G20.


    He is a short little man with a Napoleon complex (and a gorgeous Missus)

    ...but do you think 6 months will be enough time.

  • Comment number 37.

    35. At 9:27pm on 14 Nov 2010, SleepyDormouse wrote:

    Sleepy I find your questioning approach most worthy and as an approach it is as good as any. Please don't take offence so easily.

    Printing money which basically is what QE is, simply does not work in the way it is intended.

    I suspect the powers that be are more worried about deflation than they let on and hope to create a little inflation with QE but they will probably create a lot.

    Businesses need the confidence to invest and consumers the confidence to spend. QE will not bring that about.

  • Comment number 38.

    RD@36

    I suspect Sarkozy has had his eye on the possibilities presented bt the G20 presidency for some time. He may also have had some preliminary discussions with the Chinese.

    The only way I can see Sarkozy being re-elected is to be seen to be striding the world stage. The French are suckers for that kind of stuff (reminds them of when they were important).

    But of course you are right - even he could only ever make a start in 6 months.



  • Comment number 39.

    37. At 9:43pm on 14 Nov 2010, Richard Dingle wrote:

    ---------------

    Many thanks for your swift response, I appreciate it. I suspect you are in many ways correct about QE. It is not working as intended and deflation will be of concern if economies decline back into recession. But [ignoring any international agreements to the contrary] why cannot the fictional government simply spend money? All fiat money can only come from the government. The government can use fiscal measures to actively control signs of inflation.

    You also write "Businesses need the confidence to invest and consumers the confidence to spend. QE will not bring that about." I wholeheartedly agree, but with a slight twist in the order. If consumers have confidence to spend, they are either rich or employed and this has to come first for business to invest. The consumers will then produce the demand to which investors/businesses will respond. In this context QE is as much use as a chocolate teapot.

  • Comment number 40.

    34. At 9:25pm on 14 Nov 2010, hastywords wrote:

    Just a technicality but there are no commercial 4G networks anywhere in the world.

    ----------------------------

    Many thanks for this. It blows away, in part, some of my comments. Perhaps I should have known, but I assumed that Stephanie knew about the problem and its cause.

  • Comment number 41.

    #39. SleepyDormouse and
    #37. Richard Dingle

    QE is ONLY about bailing out the banks.

    The balance sheets of the banks are gigantic works of fiction - as required by law - however underneath in the real World the secured assets on the banks' balance sheets are realizable at substantially less than the book value - hence banks have to be bailed out so hence more QE.

    This is precisely the Irish situation except the UK position is over an order of magnitude worse - even without a crash in property prices - which has yet to come. The UK is in an appalling cleft stick / Catch 22/ Scylla and Charybdis situation. Unless we continue to prop up an unsustainable property bubble the banks will do bust however the act of continuing to prop up the property bubble ensures that the banks will go bust with an even bigger hole in their balance sheets. QE should never have stated (in the way it has been implemented.)

    QE is not about the recovery at all! It is about banking solvency.

  • Comment number 42.

    32. At 9:12pm on 14 Nov 2010, Richard Dingle wrote:

    26. At 8:31pm on 14 Nov 2010, foredeckdave wrote:
    ---------------------------

    Going back to re-read some of the comments .........
    It occurs to me that the different economic performance of countries is, in part, due to the personal standards and values expected of their children. The children will learn from their parents and others, initially by imitation, and then because they can see that they need to in their society to survive and prosper.

    I wonder about our society in this respect. We seem very personality/celebrity oriented. Perhaps we adults need to look in the mirror first and change; then maybe we might expect our society to change in a generation or so to something which can be economically more successful.

    The trouble is, I doubt we have that long and I wonder if we have the will to even try to change

  • Comment number 43.

    #40. SleepyDormouse
    #34. hastywords

    On 4G

    see https://news.bbc.co.uk/1/hi/technology/8412035.stm

    "4G mobile phone network comes to Scandinavia "

    Hmmm. Comments.....

  • Comment number 44.

    41. At 10:35pm on 14 Nov 2010, John_from_Hendon wrote:
    ----------------

    Surely, the best way to prop up the property market is to ensure there is market. In UK there is a shortage of property and this will remain true for many years. Prices can be maintained at current levels if there is a demand from credit worthy customers. A creditworthy customer is one [or a couple] with jobs to support paying back the loan at 5-7 % interest rate.

    Government policy is putting a million + out of work to save money. But they create huge amounts of money, far more than they are saving, with QE to save the bankers necks and bonuses. Meanwhile the economy is going down [from next March/April] and lives are wrecked as public sector jobs are really shed. This will continue for the next 3-4 years.

    I feel I am living in a mad-house! Don't they, or their civil servants, think? Or is this totally cynical and ideological?

  • Comment number 45.

    43. At 10:38pm on 14 Nov 2010, John_from_Hendon wrote:

    #40. SleepyDormouse
    #34. hastywords

    On 4G
    ---------------------------

    OK, you've proved it. I must do my own research.

    Does anyone know for sure, 'Does S Korea have 4G operational?' - Please supply a reference.
    I'll let you know if I find a reliable reference .

  • Comment number 46.

    41. At 10:35pm on 14 Nov 2010, John_from_Hendon wrote:
    QE is not about the recovery at all! It is about banking solvency.


    Agreed. It is also about buying time in the hope that something will turn up.

    It wont.

    The theory behind QE is simple. The BOE buys bonds from the banks using electronic money, the banks make more funds available to business and consumers.

    It has not worked because the banks are hoarding the released funds to shore up their own balance sheets, partly as they need to meet new ratio requirements and partly because they are aware of a possible property meltdown.

    To add to the mix business and consumers are not borrowing because they too are aware of a possible property meltdown.

    The missing spark is confidence.

    Business desperate for finance and the banks not lending is a bit of a myth. Both parties 'neither a borrower or lender want to be'.

    The log-jam is inflated property values and JFH is right on this.

    Best to get it all over with and start again. We could have done that by not bailing out the banks.

    People are smarter than the government give them credit for. They know something is up.




  • Comment number 47.

    #46 cont.

    I should have added that if you put deflation into the mix plus the shredding of jobs that will occur over the next 5 years you have the makings of a ...

    perfect storm.

  • Comment number 48.

    46.At 11:03pm on 14 Nov 2010, Richard Dingle wrote:
    ----------------------
    Banks make funds available to consumers and businesses – so why do they spend through the banks [I assume then then top-slice any money]. Far better for the government to spend directly on programmes for the public good. Eg better telecoms infra-structure Ooops sorry, we sold that off. Lets try better transport, buses and rail – sold off too. Better power generation – same again sold to the lowest bid

    Sad isn't it – Maggie started it and we have continued to point the gun at our feet.

    I'm depressed.

  • Comment number 49.

    Stephanie
    Great intro re the G4 phones !

    I am not an expert but I often wonder what cost there is involved to all of us men in the street due to currency traders ?

    I also note your thought about Asian countries not taking the "advice" of the west and the IMF, and the result of Africa doing so.

    I personally think that the prosperity of Asia is giving us in the west a good example of what hard work and sensible financial policies can do. They don't have benefits and they are not soft like us.

    They obviously make money on all the currency trades so who pays for that, me ? you ? the country ? the buyers and sellers ?

    Our currency here in New Zealand is traded a lot as our interest rates are higher than most other countries so people use the carry trade. It make sit very hard for our exporters as our dollars can go from 40 cents US to 80 cents US in the space of a year. How can a business plan like that ?

  • Comment number 50.

    The crude GDP figures for 2009 as reported by the IMF are (in Trillions of US dollars):
    Total world 57.8
    EU 16.4
    US 14.1
    Japan 5.1
    China 5.0
    Brazil 1.6
    India 1.2
    Russia 1.2
    South Korea 0.8
    ROC (Taiwan) 0.4

    -------------------


    If these numbers are correct, then, for me, it is obvious, where the point to focus is for europeans in the next decades.

    Europe and Asia.

    Asia has some tiger states and Japan who are now at least as developed as the best European countries and the USA.

    I see it as a big favour for business making, if you are in a common market, that is either strong in an international perspective, but also has much room for internal development.

    China and India are not as big as world economical factors, as they are publicly rated nowadays. In fact they are 3rd world countries with some 1st world mega cities. But that means, a rather big share of international trading and economical influence of world scale, combined with almost infinity national demand to develope their large rural areas.

    EU has a far higher GDP per capita and as a whole. But it has also room for internal development in the next 2 or 3 decades. The former eastern block countries, the southern countries.

    If european countries concentrate on developing their economically not so strong partners and trade with the developing countries in Asia, Russia and may be Southamerica, I would like to think, that EU is the economical and political winner of the next decades.

  • Comment number 51.

    #49. Digmen1 wrote:

    "Our currency here in New Zealand is traded a lot as our interest rates are higher than most other countries so people use the carry trade. It makes it very hard for our exporters as our dollars can go from 40 cents US to 80 cents US in the space of a year. How can a business plan like that?"

    Join a currency union with your major trading partners if that is Europe then join the Euro, if it is the USA or China - heaven help you!!!!! There are many countries that have lived and developed quite well by pegging their currencies to larger currencies all that you are doing at the moment is to destroy your indigenous business and transfer wealth to the bankers - is that what your country really wants?

    In the UK, the bankers and this idea of aggressive free market currency volatile revaluation has been a substantial contributory cause of the demise of British manufacture and trade - we are now totally enthral to the bankers who pay themselves for what is essentially legally sanctioned theft and we put up with it!!! (The UK people are fools and our leaders are idiots!!!)

  • Comment number 52.

    Really insightful article by Stephanie Flanders,
    I liked it very much.
    Also I liked Comment #17 by PaulRM.

    I see a certain natural balance in Paul's comment.

    === * ===
    When I was having my breakfast at a cafeteria of my guest house
    in Mountainview, CA, USA in 2003-04 time frame,
    A very very old 75+ American man and his wife were talking to me.
    In the discussion, he noted to his wife that he can clearly see
    "The pendulum shifting to the East"

    He was a little bit worried about America where Science and Math
    are being increasingly ignored as compared to a few decades back.

    There was a long discussion and I also remember telling him
    a little less noted point about India that,
    "Non-violance and no-want are taught in India **NOT** as MORAL or
    MORAL-Eastern-Values but more as essentials for keeping
    personal-internal-hygiene in that sense they are taught as a
    way of knowing our true-SELF and, in that completely different
    sense, SELF-ish values"

    That old American husband and wife quickly became my friends after
    that discussion.

    In future, a nation will more be a logical concept than it is today
    more at Geographic.

  • Comment number 53.

    46. At 11:03pm on 14 Nov 2010, Richard Dingle wrote:
    41. At 10:35pm on 14 Nov 2010, John_from_Hendon wrote:
    QE is not about the recovery at all! It is about banking solvency.

    Agreed. It is also about buying time in the hope that something will turn up.
    Richard I don’t agree with a lot of what you say but I do on this point. But I disagree with your conclusion i.e. The missing spark is confidence.

    Although personally I would have liked to see one of our bank go bump (doesn’t matter which) to introduce a fear factor. But I can understand the dilemma the government where in and so dished out the dosh! The problem is/was that the government, by dishing it out without strings attached tried to abdicate it’s responsibilities to us! And therefore we could not apportion blame on them. Although spouted openly in many quarters that these banks are nationalised, the banks in receipt of the dosh are not nationalised – yes this is correct we (UK Plc) do not own any part of them. So if the ‘banks’ want to go in one direction and the government want to go in another - we go were the money dictates. In other words you and I were sold out, i.e. canon fodder for more worthy people? (Has McBrown joined the IMF yet?)

    Now for education and money

    Quality not quantity is required, every time you increase either you devalue what is now and what as gone before. I agree with the person who said Polytechnics should never have been scraped. I do not agree university is only for the rich but it should only be available to the top 20%. Every time there is an increase in school lever educational levels (11 x A*) it must be asked ‘is it an increase or is it devalued?’ When I was 13 (1970ish) I was taught logs and how to put these on to log paper to produce a straight line and how to identify trends from staggered results, this is not taught until 17/18 today. Increase or devalue your choice, (imho; someone cocked up the N Curriculum for votes)

  • Comment number 54.

    #43 John_from_Hendon

    The so called commercial network in Sweden is really just a test network, as it was only available with one device, a data stick: just headline grabbing.

    Other 4G networks around the world are also test networks as the problem is there are very few devices to use on these networks. Verizon in the US will probably be the first operator to role out a properly commercial 4G network, interesting because they also use the 2G CDMA network and not 2G GSM.

    The issue in South Korea is really just one of compatibility with these two old 2G networks and nothing to do with 4G.

  • Comment number 55.

    #53 con_man123,

    I really don't understand your comments reagrding education. What is supposed to be so magical about your 20% figure? What is the supposed difference between a university and a polytechnic? As far as I am aware there is little truth in your contention that an increase in quantity necessarily equates with a decrease in quality (we may not be managing the relationship in our present education system). However that is a problem of the system and not a proof of your contention.

    As for your 'log' story, you also have to consider that students nowdays are also taught how to interogate and present data using electronic means even before their 13th birthday.

    Whilst we should take note of our history and our concepts of quality we must find ways of achieving more of this quality - and much work has to be done!

    I too bemoan the level of academic rigour. The response has to be to invest more in improving the ability to achieve higher standards and not in artificially limiting access to university.

  • Comment number 56.

    40. At 10:23pm on 14 Nov 2010, SleepyDormouse wrote:
    34. At 9:25pm on 14 Nov 2010, hastywords wrote:

    Just a technicality but there are no commercial 4G networks anywhere in the world.
    =========================================================================

    There are 4G networks up and running in the US, Sweden has just announced that they are about to launch a network. There is also a network in Ghana of all places and others are on trail at present around the world. There are probably more that I am not aware about.

    As far as commercial networks T-Mobile has the largest by far in the US and is forecasting to have an area offering 200 million Americans $G coverage by the new year.

  • Comment number 57.

    The nagging problems of trade imbalances and instability in financial markets reflect inadequacy of institutional framework to cope with rapidly rebalancing international political and economic power. But to consider issues in terms of Chinese undervalued controlled exchange rate and easy US monetary policy betrays lack of understanding of fundamental inadequacies of the world system. There is dire need to institute stable rules to ensure exchange rate flexibility and to co-ordinate monetary and fiscal policies. Above all there is serious need to think about viable alternatives to reserve currencies to hold reserves. Both deficit and surplus countries have responsibility to maintain stable,open international economic environment in their long term self interest. However, the new institutional framework would work only if rules of the game are transparent and ensure equitable distribution of costs and benefits of the system.
    It seems that the current issues and institutional aspirations have a similar flavour as that of those during time of John Maynard Keynes. But no person of his intelectual agility is in sight to reinvent international institutions to cope with rapidly rebalancing international economic environment. Nevertheless, those at the helm of affairs may benefit from his profound ideas to evolve the institutional framework carrying his imprint,however faint, for ensuring more orderly, balanced growth of the world economy. For example,his idea of a Central Bank with Bancor as its monetary unit is still relevant. In the absence a 'Keynes', even committed mediocrity can deliver a lot in practical terms if it remains focused on key issues,adopting a nuanced,flexible approach.
    In to-day's highly interdependent world, dialogue and diplomatic engagement,underpinned by willingness to make mutual adjustments and compromises is the prime instrument of resolving problems. The mutually destructive,retaliatory actions and threatening postures are past. The US Treasury Secretary,Tim Geither missed the point by jumping guns and inadvertently contributed to the diminution of significance of G-20 Seoul meeting. The annoucement by Federal Reserve to print 6b dollars to ease money supply,regardless of international consequences had already put a damper on significant positive outcomes at Seoul.
    Paraphrasing Winston Churchill,jap,jap is any time a better approach than bang.bang(even verbal) to reach agreements.
    To-day,humanity is at the threshold of experiencing just,peaceful,prosperous living, only seen in dreams so far.For realising this bliss point, there is greater need for co-operation among countries based on mutual understandings and appreciation for each other's concerns.Then genuine differences may become source of finding enduring solutions and institutional adjustments.
    It high time deficit developed countries realise that genesis of problem of trade imbalances and debt crisis lies in their earlier decision to shift high labour cost manufacturing to developing countries like China to keep prices in check. The outcomes of this action have been mutually beneficial. While the developed countries enjoyed high level of properity, the better organised developing countries experienced unprecedented,high rates of growth and soon graduated to become world's dynamic emerging economic power houses. Consequently, process of rebalancing world economic power commenced. The centrally controlled Chinese economy accumulated huge trade surpluses by keeping value of Yen in check. But all the emerging economies cannot be put in the same class. For example,China has been following export-based growth strategy and has a controlled foreign exchange regime. In contrast, India's growth strategy is relatively more geared to meet huge domestic demand and maintains a market determined,flexible exchange rate. While undervalued Yen hurts India's exports like those of deficit countries,weakened dollar due to easy US monetary policy strengthens Indian currency. Nevertheless, India should play an active role facilitating the institution of stable rules for regulating international economic relations.
    However, it is not generally appreciated that emerging economies with massive trade surpluses provide low-cost easy credit to reserve currency countries that is not always used properly.More often than not,greedy bankers and other speculators play up with this easy source of credit to mess up financial markets and asset values. While enjoying high living on credit, these countries forget to leash the predatory actions of speculators.Consequently, these countries quietly end up with serious debt crisis.In panic response,instead of looking at the underlying causes of their problems,they search for scape goats and resort to domestic policies that may prove to be detrimental to their long term economic vitality. For example,UK's frontal attack on public debt,resulting in indiscriminate cuts in public expenditure, might prove damaging in the long run. A more balanced, sustainable fiscal policy for the medium term might have been a better response to debt crisis.
    Nevertheless, focus on increasing exports to remove deficits is desirable. But here US and UK approaches differ in their preferences for rates of recovery. US is relatively more ambitious and optimistic than UK. However, because of domestic political constraints due to politically divided Congress,US relies more on monetary expansion, playing little attention to fiscal measures. But its performance in reducing private debt is better than that of UK. The latter remains excessively focused on public debt.
    As Stephanie has pointed outed earlier that China is aware of the need to restructure its economy and give greater importance to domestic demand. But it is concerned with social and political consequences of a rapid change in orientation. So it is a question of pacing the change for China. However, it would be in everybody's interest if China adopts a market determined flexible exchange rate soon.
    Germany,another trade surplus country, belongs to an entirely class.Though its export surplus is significantly due to its growth strategy,contribution of its efficiently managed labour,product and financial markets cannot be overemphasized.Nevertheless,it is in its long term self interest to facilitate smooth working of the world economy.
    Go on prodding pedantics of the world (including me) to think faster for a better world,Stephanie.

  • Comment number 58.

    #46 Chris London

    By 4G we are talking about LTE not HSPA+ which is what T-Mobile are calling 4G in the US much to AT&T's disgust. WiMax is also sometimes called 4G in other areas of the world but this is again disingenuous.



  • Comment number 59.

    41. At 10:35pm on 14 Nov 2010, John_from_Hendon wrote:
    #39. SleepyDormouse and
    #37. Richard Dingle

    This is precisely the Irish situation except the UK position is over an order of magnitude worse - even without a crash in property prices - which has yet to come.
    =========================================================================
    The Irish situation is very different from that of the UK. Firstly the magnitude of the debt is much higher in proportion and the fact that it is a combination of public and private debt. They also have a much smaller economy which was heavily dependant on inward investment and grants. Both of which unfortunately started to dry up at around the same time as the crash was just showing itself. Ireland was supposed to be a net contributor to the EU for the first time since joining. They also have massive personal debt often tied up in property at home and abroad, all of which was mortgaged up to the hilt. Couple that with a property bubble which saw Dublin go from the bottom of Capital city property price list to the top in just over a decade and you have a nation that sold it soul to the devil. Lets face it for a small country they had very big aspirations. They paid their PM more than the president of the US. Senior Civial Servants earned more than many MD of multi national organisations. Even their benefits were over generous to say the least. All of which led to the point where we are today. A goverment that has built up debts that it can't afford to furnish and the cost of borrowing is going through the roof. It has a property portfolio that is the largest in western Europe however it is only worth a fraction of what it was once worth and this portfolio is not just in Ireland or western Europe but also in the Eastern Block. I can't say if it is still the case but the population of Ireland owned more property in Eastern Europe than any other nation. Not bad for a population of around 4 1/2 million.....

    If the EU and or the IMF do not step in soon we will see the first of the PIIGS fall and the other domino's may follow. This will have a knock on effect to the the rest of the EU and the Euro in particular.

  • Comment number 60.

    Breaking news, Shock, horror.......

    Greece's debt is much bigger than thought.....

    Just wait until the rest of the PIIGS's books are trawled over by the IMF.

  • Comment number 61.

    55. At 11:31am on 15 Nov 2010, foredeckdave

    If I am 1 of 20 that has a qualification of std '10' and then you introduce 80 at std 8, then my std 10 is now a std 8. It is not only devalued by std but devalued by greater quantity. I was just using 80/20 as an accepted ratio.

    To give a very broad explation: University=degree, poly=HND and college=technical. Too many subjects have a university/degree tag when they should have poly/hnd tags. Again this devalues the degree.

    Do they: I don't think so, logs were removed completely a few years back!

    Yes I talk about quality, but there is also 'fit for purpose' and what we are producing is in my opinion largely unfit for purpose. What employers want is what they have always wanted - some one who can do the job at the required std. If it takes 3 to 6 months for someone who knows the job to get upto speed, in my experiance it takes a graduate 12 to 18 months to attain the same level. I never understood at 22 (cocky, know it all metalergist)when they said to me when starting work, your education starts here!

  • Comment number 62.

    53. At 10:20am on 15 Nov 2010, common_man_123 wrote:
    =========================================================================
    With regards to education I totally agree, only two years ago my daughter was one of the pupils to take the last 11+ in Northern Ireland. What she covered in that she is now relearning as it is only covered in the national curriculum at KS3 level. What a waste of three years, talk about being dumbed down. This is having a detrimental effect on her because she feels she has already covered everything that she is now being taught and it is very difficult to keep her motivated as even what they are covering now is not up to the level that she was taught for the 11+.

  • Comment number 63.

    "The Washington Consensus has been dead for a while, or at least under serious review. But the "Seoul Consensus" that the G20 signed up to this week made it official. And there were Asian fingerprints all over it."

    Quite - let's review what it was and how it is today:

    1. Fiscal policy discipline - out of the window - QE is the antithesis of this principle - as is the EuroLand bail out fund, etc.

    2. Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment - the reverse is true in Europe - socialism for bankers: cuts for everyone else regardless of need or pro-poor.

    3. Tax reform – broadening the tax base and adopting moderate marginal tax rates - sounds fair, but as the rich avoid tax, all it means is the rest of us pay more if we don't target top earners.

    4. Interest rates that are market determined and positive (but moderate) in real terms - real interest rates now negative because the market failed comprehensively so can no longer determine them: the BoE MPC is reduced to some form of Delphic oracle claiming to assess the economoy and set rates accordingly - they's be better off with chicken entrails and magic charms.

    5. Competitive exchange rates - tell that to the Chinese Communist Party... EuroLand or the BoE MPC - exchange rates are diplomacy by other means that used to be known as "war by other means".

    6. Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs - this leaves the developed economies open to massive abuse through exchange rate manipulation, so creating the current unsustainable imbalances that could destroy the entire system.

    7. Liberalization of inward foreign direct investment - all this does in the developed economies like Eire has been to fuel a property bubble that then bursts - e.g. USA/Spain/etc - UK next?

    8. Privatization of state enterprises - read "destruction of state enterprises" - British steel/coal/ship building/etc - only those countries with interventionist policies in the developec world like Germany & France has kept theirs going: the rest dismantled and shipped to China/India/etc.

    9. Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions - so far this has cost the Icelanders their financial future for generations to come, the Irish their welfare state and in the UK £40,000 for EVERY PERSON IN THE ENTIRE COUNTRY!

    10. Legal security for property rights - fine in theory, but for socially owned assets, read assset stripping to prop up the financial system - and try asking the hundreds of thousands of Americans, Spanish or Irish who have had their homes repossessed just how much "security" they really had?

    Not much of any substance left, is there?

    These were the "Ten Commandments" of the libertarian ideology that insinuated itself into the political party system in the 1980s - yet to listen to all three UK political parties today you'd find that they STILL believe this nonsense.

    The ConDems are now nailed to it - once Ed Milliband has come back to work perhaps he'd like to start a serious debate to debunk the Washington Consensus and begin the process of developing a progressive alternative that doesn'r rely of savaging our public services to provide socialism for bankers and going along with chinese communism for world trade?

  • Comment number 64.

    #

    "The mutually destructive,retaliatory actions and threatening postures are past."

    Whilst I will not argue with the need for a new regulaotry international framework, this is only one part of the solution. I am not sure anymore that we can actually achieve a mutually beneficial comprehensive system as there appears no coalescence of ideas - even on timeframes. Hence I have to challenge the statement made above.

    What is in China or India's best domestic interests is totally different from that say in the UK or USA. Now you can genuinely say that Western Hemisphere self-interest has been a prime driver of the present imbalances. However, neither of us can change what has happened. We are left to try and sort out the mess and those messes are grave for all concerned.

    In Europe I believe that we have a responsibility to firstly look after the long term wellbeing of our own populations. That does not mean that we are against either India or China looking after the wellbeing of their populations. What we are saying is that we are no longer willing to fund that development. So we have an impass and one that will not be resolved by giving a little here and taking a little there.

  • Comment number 65.

    #61 common_man_123,

    So what you are really saying is that you believe that your degree is 'better' than one that is being awarded today? That may be right but it also may not be. I was completeing my degree when you were 'logging' lines. Upon graduating I understood (or thought I did) a body of knowledge. I had however developed during the experience in many areas (apart from booze and sex) that were not examened. The university experience was never meant to be the mere acquisition of facts.

    Later, I was fortunate to be able to undertake both Masters and PhD studies. To be able to progress these studies I had to both challenge the orthodoxies that I had been taught at degree level and update my knowledge in the light of new 'knowledge' that had been developed since my degree. Hopefully, in some small way, my efforts have added to the store of both knowledge and understanding for both students and practitioners to avail themselves of and progress further than I was able to do.

    Hopefully from that potted history you can appreciate that I view education as a comprehensive experience that should always attempt to deliver the best quality outcome that it can for as many as it possibly can. That I do not argue is not being achieved at the present time at all levels.

    Like you, when I got my first job I was met with "oh no! Not another bloody student!!" The people doing the job just viewed me as another block to them doing their job. In fact the knowledge that I was supposed to have was of little practical use - that changed as the level and scope my various jobs developed. It is no different in industry or commerce today.

    I still don't understand your deference to a title - either of the course of study or the name of the institution providing it. I don't mean to be disparaging (honestly) but why does a metalergist need to have a degree useing your definition?

    Behind it all I think we both agree that, no matter what you call it, the quality of education is what we should be focusing upon. I do not believe that our present systems are doing that.

  • Comment number 66.

    #65. foredeckdave
    #61 common_man_123,

    Precis : education matters and a quality education matter more.

    Quite right. And it is impossible to believe that the 'never mind the quality feel the width' attitude is a substitute for the real educational standards of 40 or more years ago. (Why 40 years - OK when I did my first degree.)

    I did notice that the undergraduate students that followed me, and I came across, while I was doing my PhD seemed to be not as bright as the ones I met during my undergraduate studies (at a different university) and they were far more mercenary and far less keen on education as an end in itself. When I moved into the 'world of work' I picked up a couple of proper professional qualifications, but the educational self reliance and the ability to engage in original research and investigation that I had learned and developed earlier is still invaluable as are the high levels of analytical and critical skills.

    When my parents went to university in the late 20s/early 30s there were about 50,000 undergraduate students, when I went in the late 60s there we about 150,000 or so and 70% had all their fees paid and had a maintenance grant on which they could live (OK it was only £300 or so a year but I recall that some of my fellow students saved money too!

    My 'solution' is to cut the number of students to that number the country is prepared to fund in the way they did in my day (I would have in said my mother's day - but funding then was through scholarships and bursaries without state help at all.) Why is this impossible? Are we poorer now than we were in the late 1960s/ early 1970s?

  • Comment number 67.

    66. At 2:27pm on 15 Nov 2010, John_from_Hendon wrote:
    'Are we poorer now than we were in the late 1960s/ early 1970s?'

    Yes much poorer

  • Comment number 68.

    #66 JFH,

    Now I know that some (maybe many on this blog) consider my ideas to be wild socialist dreams but I do feel passionate about the provision of quality education for everybody. The more people that we have in society who are trained to think the brighter our future prospects.

    If I could, I would invest the full cost of educating a child upon birth right up to PhD level. Now, we know that not everybody has the capacity or desire to reach that level but that allowence could then be spent on meaningful life-long learning programmes. The money that was not used could be transfered to others who do require/desire more costly education programmes.

    Everybody born in this country would carry with them the financial guarantee that when they needed more education (at whatever level) the funding was available.

    Too expensive you may ask? Well what will the cost be over a couple of generations of continuing with an under-educated society. If we remove the funding dilema then we can concentrate upon improving the quality. If we take common_man_123's HND example the a programme that less than 10 years ago was a full time programme is now reduced to 2 day contact time. How can you expect to deliver the same quality!

  • Comment number 69.

    #67 Dempster

    No we are not. The problem is that the wealth has been concentrated to such a degree that the majority feel poorer

  • Comment number 70.

    69. At 3:08pm on 15 Nov 2010, foredeckdave wrote:
    #67 Dempster

    No we are not. The problem is that the wealth has been concentrated to such a degree that the majority feel poorer
    -------------------------------------------------------------

    I have never seen any figures for the UK that address this in a simple manner.

    I have seen figures (but cannot find a link at the moment) that showed that a couple of years ago the average worker in the USA was poorer in real terms than in 1973. I expect it is worse now.

    I will try and find a link to this story.

  • Comment number 71.

    69. At 3:08pm on 15 Nov 2010, foredeckdave wrote:
    'No we are not. The problem is that the wealth has been concentrated to such a degree that the majority feel poorer'

    Feel much poorer or are much poorer?
    There is a not insignificant difference.



  • Comment number 72.

    44. At 10:48pm on 14 Nov 2010, SleepyDormouse wrote:

    In UK there is a shortage of property and this will remain true for many years.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    Still puzzled as to why people think there is a shortage of property in the UK...

    ...I may be out of date (these days I forget my sources too) but the last I heard the average family size was 1.8 children per couple. And the population of Britain is supposedly ageing. The same trend is seen all over Europe. There are fewer little Europeans being born all the time. So where (apart from the breakdown of the family unit) is the pressure on housing coming from?

    As far as I can tell, the upward pressure on house prices was simply a supply-and-demand response to the availability of mortgage credit, and had nothing to do with the supply of housing. i.e. inflation of the GPB in respect of one type of asset...which is finally catching up with us in respect of everything else.

    But I'm probably wrong...better figures anyone?
    ===========================
    @61, 65 and 66 RE: SEcondary and Tertiary Education

    Some 20 or so years ago, I 'lost' my position as a junior member of the quality committee in a university in London. The crime? Suggesting that we should approach the employers of our ex-students for a measure of the quality of the department's output. The correct answer? The committee recommended improving the internal measures of quality such as attendance records and student satisfaction surveys.

    In my first term in another establishment (not long afterwards,) I was expected to set an end of year exam for a nationally recognised qualification. When I asked for the academic guidelines for the exam, I was told to "set it so that most of them pass".

    Go figure.

    What is worse, is that for a variety of reasons, academic qualifications in the UK have never been allied with business needs...and the nation's teenagers are consistently demoralised by the "waste of their time" sitting through [insert subject here].

    In fact, the only academic qualification (beyond basic English and Maths) that appears to add value to your CV is a professional qualification, for which you pay handsomely and which is never offered by any of the government-finded courses.
    (e.g. Does anyody know a university offering an AQA or a Microspot Certified Professional course?)

    Market value and academic snobbery. If its not "classics" you're not intelligent, and if its not run by the Guilds its not worth having.

    Business has said for years that youngsters are not coming out of school prepared for the world of work. And mushroom has often puzzled about the stranglehold that universities have on 16+ and 18+ qualifications. Universities who are themselves largely irrelevant to business needs, and who are naturally only interested in offering subjects that they can examine.

    If instead, the professional bodies offered professional qualifications through secondary schools, those schools might just become more relevant, and pupils more interested in learning.

    This is not just the blue-collar skills, but what passes for "A-levels" as well.

  • Comment number 73.

    70. At 3:30pm on 15 Nov 2010

    In relation to my earlier comment there is a graph here of average USA personal earnings:
    https://www.visualizingeconomics.com/2008/05/04/average-income-in-the-united-states-1913-2006/

    It is not inflation adjusted but I think does demonstrate that earnings increased by about 10% over 30 years from the mid 1970s which I think makes my point. Again this must be worse at the lower wage levels if we believe that the highest earners have managed to gain a larger differential.

  • Comment number 74.

    Education (still!)

    A hundred years ago many 'practical socialist' institutes were set up with the aim of educating adults. They were mostly free and offered radical and rather political education to those who had left school at the age of 14 or even lower. People wanted education as through it they could see that they could improve their lot. The 'practical socialism' movement went along side the wok of people such as Octavia Hill (Ruskin and Morris etc.) to improve the absolutely dire state of the housing of the poor in the cities.

    What has happened to this movement? They built the garden cities but now there is no visible political philosophy behind the likes of Milton Keynes - why?

    On the money issue. We are better off now on average than we were when I went to university and much better off than when my parents and their generation went to university. Beer, the staple of the student diet, costs over £3 a pint today when I went I recall scrumpy at 4/3 a pint (I think) my parent's generation could not afford beer/cider at 3d a pint - unless they were really rich!

  • Comment number 75.

    #71 Dempster,

    Try not to avoid the quaestion or to be obscure but is there actually any difference - assuming that both richness and poorness are reltive terms?

  • Comment number 76.

    In relation to my earlier comment on housing...there is a pretty darned fine link at the governments own ONS.
    https://www.statistics.gov.uk/pdfdir/births0810

    Children born of UK-born mothers is nearer 1.7 than 1.8 (1997 to twothousandandsomething.)


  • Comment number 77.

    THE FIRST ATTACK

    So the government has decided to cut the Legal Aid budget on the grounds that it is not financially sustainable. Well goodbye society, Thatcher has won! We are all in this together - what a joke! If you deny the right to law to thse who cannot afford the cost then the door is open to deny any rights you wish.

    If the government want to reduce the cost of Legal Aid then they should look at the absured costs charged by the Chambers and the Law Society.

  • Comment number 78.

    68. At 3:06pm on 15 Nov 2010, foredeckdave wrote:
    #66 JFH,

    "Now I know that some (maybe many on this blog) consider my ideas to be wild socialist dreams but I do feel passionate about the provision of quality education for everybody. The more people that we have in society who are trained to think the brighter our future prospects."

    Unfortunately FDD our state education system teaches individuals to pass exams, not how to think critically or openly. It reinforces statist, Keynesian, leftwing thinking. No wonder you want to commit so much of other peoples' money to it.

  • Comment number 79.

    Stephanie - you said "As we know, there was vanishingly little progress on the debate of the hour - the question of global imbalances...."
    ...............................................................................
    Robert Skidelsky sees a whisper of alignment of Chinese and US thinking and Keynes is a common theme. www.skidelskyr.com/site/article/a-golden-opportunity-for-monetary-reform/

  • Comment number 80.

    Crash JP Morgan buy silver!

  • Comment number 81.

    80 Stopus - rock on baby - Max Keiser is the man

    77 Fdd - about time. I am sick of my tax money going to line lawyers pockets on spurious cases. The legal profession needs revolution - charities, pro bono work, no win no fee etc etc. If you care so much about the poor set up a charity to fight their cases.

  • Comment number 82.

    @19. At 6:41pm on 14 Nov 2010, WolfiePeters wrote:
    "The Bank of England was created after the Battle of Beachy Head as the English gov of the time needed to build a powerful Royal Navy, but had no money to do so. The consequence of that was: a powerful navy, industrial and agricultural development, the growth of the British Empire, and perhaps even the industrial revolution."

    What funded the shares in order to set up the BoE in the first place? Tally sticks: a debt-free, fiat currency, which was good for the payment of taxes and to facilitate trade. Does it not strike you as slightly ironic that a currency designed to prevent the BoE's stranglehold on FRB was used to set it up in the first place?
    You of course realise that the tally sticks weren't sufficient in "value" either to actually pay for the BoE. The rest of the shares were bought with debt - created by the BoE, for its initial shareholders, to increase their own stake.
    Now that seems rotten to the core. Do the ends justify the means, i.e. the British Empire? I'm not altogether sure they do. One can only speculate as to how different the world would be, for better or worse.

  • Comment number 83.

    64. At 12:46pm on 15 Nov 2010, foredeckdave wrote:

    'In Europe I believe that we have a responsibility to firstly look after the long term wellbeing of our own populations. That does not mean that we are against either India or China looking after the wellbeing of their populations. What we are saying is that we are no longer willing to fund that development. So we have an impass and one that will not be resolved by giving a little here and taking a little there.'


    ................


    The trade deficit with China is circa 17 billion, the biggest of any country we trade with by a long way. The UK government borrowing due to overspending in Oct 2010 was over 16 billion, nothing to do with the Chinese. Which do you think is the bigger problem.

    'The crude statistics of our trade in goods and services with China tell you most of what you need to know: in 2009 we sold £8.7bn of tangibles and intangibles to China, and we bought three times as much, £25.8bn, from the Chinese.' R Peston
    https://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/11/can_the_uk_close_massive_defic.html

    'UK public finances post record deficit
    Osborne's plan to wipe out deficit under threat as expected tax receipts disappoint, forcing UK to borrow £16.2bn last month'
    https://www.guardian.co.uk/business/2010/oct/20/government-borrowing-hits-record-high

    Why do you keep on about looking after the EU locals etc etc and protectionism etc etc when it is obvious the problem at home in the UK is a far bigger problem and spending simply has to be cut. Economic growth forecasts in the eurozone are 1.4 percent and much the same in the UK. 2.8 percent is considered necessary simply to replace jobs lost in the public sector. This is a British problem not a Chinese problem. it has nothing to do with India.

    The public sector simply cannot take much more from the tax payer and that problem is resident in many developed countries.

  • Comment number 84.

    77 fdd

    You have no idea how frivolous legal aid cases can be and also how many would not move forward if there was the slightest cost had to be incurred by the plaintiff. Furthermore with the risk of legal aid funded appeals parties who do not have access to legal aid face a hefty bill if the appeal is successful and that is enough to put many off a court defence. This is the same problem as the recently reported issue of frivolous action against employers were due to the high legal costs of defence, circa 25K, some are simply paying out to avoid court conflict with serial 'claimants' who move from company to company repeatedly making the same claim against their successive employers, yet who face no downside for this activity.

    There must be a better use for the 350 Million pa saved by this proposal than its previous role of filling solicitors pockets.

  • Comment number 85.

    74 John_from_Hendon:

    'A hundred years ago many 'practical socialist''...

    Oxymoron?

    'What has happened to this movement? They built the garden cities but now there is no visible political philosophy behind the likes of Milton Keynes - why?

    Nope its still there, its called Milton Keynesian, a Paradise Lost, or the Promised Bland.

  • Comment number 86.

    59. At 12:04pm on 15 Nov 2010, Chris London wrote:
    If the EU and or the IMF do not step in soon we will see the first of the PIIGS fall and the other domino's may follow. This will have a knock on effect to the the rest of the EU and the Euro in particular.


    Careful what you wish for. (I reckon it is a wish though it could be a well thought out analysis).

    The German economy will not give up a huge internal market without a fight. The most likely outcome will probably be DM2.

    The Euro has too much political muscle behind it and it will survive. As you know I am very pro the Euro but have always been well aware of its economic deficiencies.

    Its politics stupid.

  • Comment number 87.

    #86 more...

    Apparently a recent German think tank (I have lost the link) is testing the water with a plan for an arc of countries taking in Spain, France, Benelux countries, Germany, Poland and Russia. No Italy or Greece. A new high population area with a new currency based on the old DM. The addition of a BRIC country is interesting.

    Not sure how seriously to take this. It might have been from a German 'Private Eye' type rag (but, no the Germans don't have a sense of humour).

  • Comment number 88.

    #78 truths33k3r

    But at least they appear to be learning just how stupid you libertarian rubbish is!

  • Comment number 89.

    61. At 12:13pm on 15 Nov 2010, common_man_123 wrote:
    55. At 11:31am on 15 Nov 2010, foredeckdave

    To give a very broad explation: University=degree, poly=HND and college=technical. Too many subjects have a university/degree tag when they should have poly/hnd tags. Again this devalues the degree.


    Do tags matter.

    Education should encourage and stretch enquiring minds, it should teach the basics well, logic and mathematics, and it should be free from start to finish. It should encourage people to go where their mind takes them.

    Business requirements are best served by the education system producing people who are literate, numerate and capable of thinking out of the box. Specific business skills are then bolted on by taking an apprenticeship or professional qualifications.

    Who knows where a particular educational path will lead. Both Rowan Atkinson and Jonathon Miller started with medicine and ended up in showbiz.

    As for comments that education is dumbing down (11 x A*).

    This is very unfair on the present generation. A more logical explanation is that preparation is more thorough and focussed, there are more resources available, and students are more result orientated.

    As for 'ye olde log tables'. So what. They are just a resource, now found on most calculators.

    Or they could be a party trick. I am told that the famous Italian Physicist Enrico Fermi (Manhattan Project) amused his colleagues by memorising the whole darn lot; now if that is all he could do he would have been pretty useless but it wasn't.

    Blimey a whole post without mentioning the G word (it won't last).

  • Comment number 90.

    #83 Not Buzz Windrip,

    Are you really as short sighted as your posts suggest?

    The whole of the deficit can be eliminated merely by recovering the amount of tax that HMRC says has been evaded by both individuals and companies. Note that is tax that has been evaded (illegal) and not tax that has been avoided (legal). So your proposed explanation is truly spurious.

    The true long term economic problem lies in the imbalances that even you agree exist. At least I am proposing some ways of addressing that problem rather than just accepting it and its consequences.

    As for the cuts themselves, they would have some credit if the savings were then re-allocated into some form of long-term development. However they are merely being donated to their friends in The City. So we cut ans cut and cut (a la Ireland) and we get no further towards addressing the most important strategic question.

    As for the legal Aid budget I wouls say that one employers frivilous action can aslo be one employees livelyhood. You focus upon the employee but I can aslo point to vast numbers of employers who have been proved to be exceeding their legal powers.

    Once you remove the ability of an individual you seek redress in law merely on the basis of cost then you are starting upon a very slippery slope. If you want to reduce the cost, and I have no objection to that, then direct your fire towards the lawyers and their fees - that is where the true costs lie.

  • Comment number 91.

    #80 stopsupportingcriminals,

    "Crash JP Morgan buy silver!"

    You can't as they have already fixed the market according to some whistle-blowers!

  • Comment number 92.

    88 FDD - that would be true if it was ever presented to pupils for consideration.

    No school like the Austrian school.

  • Comment number 93.

    2. At 10:06am on 14 Nov 2010, John_from_Hendon wrote:
    #1 SleepyDormouse wrote:

    "Fixed exchange rates will doom us to repeat the mistakes of the first 50 - 60 years of the 20th Century."

    But, when the G200 agreed (sort of) not to engage in competitive devaluation that is (more or less) what they agreed!

    The conclusion can only be is that the amateurs don't understand much about economics and we, as a World, put far too much faith in their knowledge and skill!



    = = = = =

    Purleeeze!

    The easiest way to cut down on University places is to give would-be economists their degress in exchange for so-many coupons off the back of serial packets. Make sure, though, that they buy good quality crystal balls (not the horrid acrylic ones) from their own pockets, not the public purse.

    Many of them buy these horrid, cheap small ones with flaws. That's why their forecasts are so wonky.

  • Comment number 94.

    91 - FDD - you are confusing th price of physical silver vs the paper price on the comex. If everyone bought physical silver the naked shorts would be bust. It would be an epoch defining moment, a quiet revolution, as people would see the scale of the manipulation and question the value of paper money in principle. If enough people took their cash out of the banks they would also crumble.

  • Comment number 95.

    #92 truths33k3r,

    "No school like the Austrian school."

    Now there I agree. There is no other school of economic thought that has been so wrong for so long

  • Comment number 96.

    92. At 10:08pm on 15 Nov 2010, truths33k3r wrote:
    88 FDD - that would be true if it was ever presented to pupils for consideration.

    No school like the Austrian school.


    And what school might that be.

    The Spanish Riding School of Vienna ?

    Oh you mean Hayek.

    Ironic that the Austrian economy, like Germany, is a Social Market Economy model. (Social not Socialist, I must stress that).

    Though I suppose Social Market Economy is sort of Hayek (based on free enterprise) but with a framework to provide security for all the 'stakeholders'.

    I suppose if you take a simplified understanding of Hayek, mix with Tory Boy ideology, shake thoroughly you get The Mess That Thatcher Made.



  • Comment number 97.

    #96 Richard,

    have you been on the sauce tonight?

    Go back and read the definitions of the Social market Economy that you posted and then do some research on Hayek. Even at a stretch you can't bring the two together.

    BTW the social/socialst joke is wearing a bit thin.

  • Comment number 98.

    #94 truths,

    OK, thanks. Looks like we were both gnawring on the same stick for once :)

  • Comment number 99.

    97. At 11:57pm on 15 Nov 2010, foredeckdave wrote:
    #96 Richard,

    have you been on the sauce tonight?


    No, last night but it hasn't worn off yet :)

    I was stretching it a bit. Quite a bit actually. But...

    At the time the SME model was born the main proponents were at University of Freiburg at the same time as Hayek, and they did share a lot of common ground. After all, both schools of thought are under-pinned by strong conviction in the importance of market forces.

    Hayek was in at the birth of the Social market Economy whether you like it or not and helped shape it by constructive critiscm.

    Hayek was a thinker. Thatcher was a vandal armed with that most dangerous of things (..a little knowledge). All that drivel about 'no such thing as society'.

    Incidentally, one of the counterweights given to the German worker (to compensate for the effects of an enterprise based economy) was a committment to free education.

    No more social / socialist jokes.




  • Comment number 100.

    #99 to continue

    "Its main purpose is to institutionalize competition, precisely as seen by the German ordo-liberals. This is the type of “planning” which Hayek not only accepts but emphatically requires at this point of time and distinguishes it both from socialist planning and from the laissez-faire credo." (Stefan Kolev University of Hamburg)

    Presumably 'ordo-liberals' means liberal economics with some order or framework, i.e The Social Market Economy. This group, 'ordo-liberals', were influential in Freiburg in the early 1950s and are associated with the birth of the SME model.

    So Hayek a closet Social Market Economist - not so far fetched after all.

    He was definitely not as laissez faire as Mises.

 

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