Be Excellent To Each Other

A very interesting post if I may say so, albeit there is precious little upon which we agree.

First off, I totally reject the notion that there is little or no causation between Labour's mismanagement of the economy, and the awful mess we now find ourselves.

For a start, had Labour not entirely spent up their tax revenues/resources in each successive year from 2002 on, we would have some actual reserve upon which to call upon to stimulate the economy (albeit through worthwhile capital/infrastructure projects rather than some crass attempt to get people buying more foreign manufctured consumer goods in time for Xmas, duh), now that we are in dire straights. But of course, Brown piled vast, vast sums into the Public Sector with no actual reform (spent on wage increases in the main). So predictably, we've seen paltry improvements in the performance of likes of the NHS that are in no way commensurate with the vast additional sums ploughed in. You simply cannot throw good money after bad; if something is woefully inefficient, centralised and mired in beaurocracy one has to reform it first, before chucking our cash at it. But then, that would never please our good friends in the Union movement, Labour's increasingly sole paymasters.

Wasteful investment with no reform aside, Labour's love affair with the City is also at the root cause of the UK's problems. It doesn't take a genius in financial affairs to work out that, with no regulation at all of the mortgage markets for example, any policy whereby 125% mortgages are doled out willy-nilly to people without jobs so's they can blow the lot on cars and holidays on the never-never, and even that based upon grossly pumped up house valuations in the first place, HAS to end in tears. Similarly, our spiralling credit card debt as a nation has increased year on year to wholly unrealistic proportions - there was simply no way that the whole of this debt or anything like it was ever going to be repayable. In fact, the entire business fundamentals of banking have been chucked out of the window under Labour (ironic indeed, given Thatcher's free, unfettered market credentials).

So, it's hardly surprising then that we are faced with near collapse of our major banks and have had to massively bail them out with public money just at the very time when this cash was needed most. It's a Perfect Storm, and Labour/Brown negligently ignored the repeated gale warnings. They just couldn't bring themselves to believe that the 'loadsamoney' false economy would ever end, just as they are now themselves so flagrant with government borrowed billions that we don't have nor can afford, somehow believing that this won't have a deleterious effect on our economy despite all the clear evidence to the contrary. It's sheer stupidity on a tragic scale.

In short then, this is quite the most inept government we have ever had, based on hard facts and performance. Had the economy been properly managed and public sector reformed at leisure during the last 10 years, WE IN THE UK simply would not be where we are now.

As to your comments re. growth, I agree that unsustainable growth based on a false economy of credit and ever increasing personal and government debt IS a bad thing, yes. But REAL SUSTAINABLE growth clearly is not; this is the sole engine by which all net increases in average prosperity and living standards is driven. It's tempting to say 'if only Labour knew the difference between the two', but of course they did then and they still do now. The uncomfortable fact is, Labour and the BoE fully appreciated that the economy was riding on credit and the housing boom by 2002, but rather than gently quell this through proper management of the economy, regulation and monetary policy, they actively encouraged it, knowing full well what they were doing. Hence, they are guilty as sin in all of this; any claims that it's all about problems in the US and 'nowt to do with us guv' are about as credible as their justification for ID Cards or the Iraq War.

What astounds me is that even though I could see that the housing market was going tits up, and even though there were too many giant flat-building iniatives in Cardiff already, they kept whipping up increasingly big schemes to build more and more 'teh future' apartment blocks, including in the bay which is miles from the shops. Seemingly ignoring the fact that no one is going to come and move in if the jobs and infrastructure aren't there first.

This folly was crowned with the new big building of a pointlessly massive shopping centre, St David's 2, despite there being loads of shops in Cardiff already. It smacked of building for the sake of it, councillors putting forward grand plans to make it look like they'd achieved something, when in reality they were being complete clots. And now they've got to finish it. And there's probably going to be about two successful big shops inside, a load of struggling ones and barely anyone spending any money inside but still passing through and marvelling at the shiny new monument to credit-based-idiocy.

They should have built a nice new park, like I suggested.

Captain Caveman, I half agree with you. They should have poured cold water on our credit-mania by regulation and promoting... *gasp*... prudence. Funny how we have lots of govt. warnings that smoking can kill, but none on how credit cards can destroy your finances and leave you a panicking, depressed, wreck.

And pretty much all egged on by Thatcher's supporters, of course - John Redwood was complaining that mortgage regulation was too strict just a couple of years ago, remember!

I honestly don't think so old chap; there is a clear, undeniable link between the mess that we find ourselves in THIS country and the poor financial management of this government, some obvious examples of which I outline in my earlier post.

It's hardly coincidence that the IMF regard the UK as uniquely worst placed amongst all the leading world economies to weather this storm. Why do you suppose that is? Well, Labour's pissed all our money up the wall for starters, which isn't usually regarded as a virtue in these situations. There's no-one else we can blame in this; these decisions of the last 11 years (and most especially the last 7) are entirely down to Brown and Labour.

The end of boom and bust indeed... my, how those words must haunt him when he's not too busy texting his votes on The X Factor.

True enough Peter, and not that this was even official/accepted Conservative Party policy (merely a 'blue sky thinking' consultation paper), but get this old chap: neither John Redwood or the Tories have been in power these last 11 years, Labour have. And therefore it is they who are responsible for the crass mistakes made and mismanagement of our economy, no-one else.

Oh of course. Mind you, it's my view that the reason we've ended up here is the laissez-faire system that you can trace back to the break with the post-war settlement: regulation derided as evil, huge influx of credit, and the worship of money above all else. A set of ideas New Labour fell in love with when the City's promises were so enticing, and now we all have to foot the bill when the imaginary money has been revealed to have no clothes...

Yes, but ultimately it's going to reflect worse on the incumbent leaders I would have thought, not the tories.

I was properly gobsmacked when I heard about the arrest last night.

Interesting if somewhat scary times ahead, I'll wager.

One bright side of all this: surely the government will have to rein in the shockingly expensive ID card project now, won't they?

The problem with this line of argument is that some 98% of the toxic debt portfolios are rooted in the US mortgage and credit markets, not ours. The reason UK banks are getting brutalised over it is that they've invested in those debt products from the US mortgage clearance houses, not because they've directly offered crappy mortgages to UK homeowners.

Yes, as a result of that there has been a significant downturn, and now those 125% mortgages are turning round to bite them in the arse because they represent a much higher amount of negative equity than was ever expected, but they aren't at the root of the problem.

You'd like to think so old chap, but given recent events I fear not, somehow.

/OT

Good to see you G-Man, I do hope you are well.

Cavey

It's also worth pointing out, when talking about regulation, that the financial industry is a thousand times more heavily regulated than national and local government is. Nobody saw this coming - if you'd tripled the manpower and clout of the regulators it wouldn't have done a damned thing.

I disagree Craster old chap. Yes, those foreign toxic debt portfolios were doubtless the catalyst and would have hardly been helpful, but this was always going to happen one way or another, with or without these. The UK has quite enough of its own home grown toxic institutional, credit card and mortgage debt all of its own.

We are uniquely faring much worse than most other comparable economies in all of this, which is no doubt indicative. I wish it were not so.

If people couldn't see this one coming from a mile off, they must've been blind.

People saw this coming several years ago to various extents: Krugman pointing out that the housing market was going to burst, and Roubini crying doom to all and sundry. But the prevailing economic winds and minds were against them.

(I'd disagree about the deregulation issue - both here and in America, vital parts of banking protection laws have been weakened over the past few decades which lead to this.)

I agree with a lot of the points here but I think it's going a bit far to start blaming buy-to-let and mortgage foolishness and personal credit card debt levels on the incumbent government. I mean, a lot of that stuff was popularised (at least by philosophy) by Thatcher, AFAICS.

Also as a Tory, shouldn't you be clamouring for *less* government meddlingregulation in all walks of life?

edit: @cave-o here

Actually, I *did* used to claim that ever increasing deregulation of markets (the stripping out of red tape, if you will) was a fine aspiration by default: let the markets run themselves. Shows what little I know, I suppose.

Clearly, we can now all appreciate that 'light touch' but effective regulation is mandatory.

They didn't start it, but they (and the Bank of England) encouraged it with the ultra-low interest rates. They can't escape blame on that front.

Good points. I'm moderately annoyed about the current interest rate dive. I suppose it's intended to kickstart everyone rashly investing and obtaining ludicrous mortgages again. Great plan.

Has this Beeb article been linked?


Hmmmm.

What confuses me then, is this - why would major lenders with more experience in the industry than most of those who make treasury policy and work for the regulating bodies deliberately get themselves into a situation where a majority portion of their debt portfolios were worthless. Because that's what we're saying if we think that everyone knew this was coming.



The point of high interest rates is to control inflation. We're looking at hitting deflationary figures over the next couple of years, so why wouldn't you cut them? High interest rates do not promote consumer saving. All they do is force people to hand over more of their cash to the banks, because the vast majority of people have more debt than they have investments.

Can we stop clinging to the "the Tories started it" thing - they haven't been in power for 11 years and Thatcher for nigh on two decades. And I say that as a natural Labour supporter - at least the Labour I grew up with.

Plenty of people saw this coming - no market could withstand the growth that the housing market has seen over the last few years and with people trying to get onto the property ladder for the first time, being screwed from all sides, it was impossible to get a reasonable mortage. (Remember when a mortgage was 3x salary?)

Add in the 125% or no credit check mortgage and no-one comes out of this with any - ohho credit.

As I saw, plenty saw it coming - they thought as the debt was chopped up into tiny pieces and spread around, they would all be immune. the problem is that at the end of the day, something physical has to change hands, a coin for a packet of sweets, or else the whole charade of pretend money moving around has no basis.

Oh. Well, they were for me. Perhaps I'm gullible

Re the "everyone knew it was coming" thing - I bet they did too. But everyone wanted to line their pockets while the going was good. Greed is good etc.

Michael Lewis on the sub-prime scam

"The Tories started it" is fair comment when being compared to the 'glory days' of Thatcherism, I feel, but not particularly helpful at the present time, I agree.

What the man said, basically. Bravo sir. *claps*

I think that's incontestable. Ascribing blame is very difficult - of course something caused it, but I wouldn't be so simplistic as to point to any political party. Perhaps that's more what I was getting at before - in general, recessions are cyclical, albeit not in a way that is entirely predictable. That there would at some point be a downturn was the truth - predicting when, and perhaps escaping with your wonga to some far-flung island, was very difficult, so much so as to make doing much about it (like that escape) more a matter of chance than judgment.

I'm half way through this and it's already article link of the month for me. Thanks Peter! You've got the news!

Glad to be of service! (the book mentioned in article, Liar's Poker, is a great read too!)

I have no idea what you eggheads are discussing in here, but I'm sure you've all got smashing blouses on.

It's a sliding scale.

I blame the Lib Dem backbencher cunts who stabbed Kennedy in the back. It may have taken twenty or thirty years for them to be electable, but he was making progress on turning the party into the only significant opposition to Nu Labah, and had they not screwed him over I think there was a reasonable chance that the party could have become one that would call any government to task, perhaps even by now. They certainly had less to lose than Cameron by being outspoken and banging their fists a lot whenever Blair or Brown started acting like a prick. And watching Brown get harangued both by those two pillars of British politics (the sneering toff and the shouty drunk) would have have been great.

Kennedy was a rare commodity. A politician I actually liked.

And there was me thinking he was nothing more than a smug violinist git.

The very qualities I like! Especially git.

No, you're probably just sensible. Relying on people to be sensible is demonstrably rubbish economic policy though

I don't think it's sensible to be partisan in a situation like this - saying it's entirely the US's fault is just as silly as saying Gordon Brown did it personally (and is entirely responsible for everything ever, including AIDS, which seems to be the current thing we are supposed to be doing).

What we do have is a Labour government who've messed everything up with pretty extreme conservative policies, and are trying to get out of it with pretty extreme socialist policies.

Oh man.

Well, I don't think it's unreasonable of me to hold the government of 11 years standing largely to account for the financial mess in which we now find ourselves, particularly as I have taken the trouble to explain why.

Still, I realise that accountability in politics is a somewhat old fashioned, outmoded concept in today's world, most especially when one is talking about Nu Labour. They didn't seem to mind taking all the credit for the economy when things were on the up when they first took office, though - funny that...

I feel I should read further into this before arguing points. However, I have Primo Levi's 'Is This Is A Man/The Truce' to get through, a novel to finish, an interview to prepare for and other stuff. So, errr....

Quite - but in the same vein, instituting an agressive policy of financial regulation in the UK isn't going to help that much if the US don't follow suit.

Individuals are as much to blame as the banks and governments who allowed this to happen (and indeed, actively encouraged it). There was nothing stopping anyone with an understanding of even basic maths from working out that it couldn't last forever. The only succesful rule of making money is to produce more than you consume. People were consumnig stupid amounts and producing little. People were spending more than they had coming in. People were buying things that were priced at several times an already profitable value, and taking on enormous loans to pay for them, which would take a lifetime of flawless economic stability to work. Nothing but greed, wilfull blindness and pathetically weak-minded materialism.

I mean, fuck, I've been saying things would go to pieces and screw everyone over when the housing market turned out to be floating on fairy dust, and I'm still not entirely sure what APR stands for.

Is it, though? New Scientist did a special on this lately. The earth has finite resources: finite iron, finite oil, finite coal, finite lithium for batteries and titanium for catalytic convertors. Finite power, finite raw materials. In the face of finite resources, how can economics be founded on the principle of controlled but endless growth?

Take a look at this graph. It shows how measures such as paper consumption, ozone depletion, species extinction, and water use have changed over the last two centuries; now think about what that graph will do over the next century. Where are the hard limits? When will we reach them? Can you honestly say you won't reach them?

Seems like most of the New Scientist articles are on their website. They make very sobering reading.

• How our economy is killing the Earth
• Why politicians dare not limit economic growth
• Does growth really help the poor?
• Life in a land without growth

Fucking commie.

New Scientist? Shit Scientist more like! Those fuckers should pull their finger out so we can mine other planets and sort space travel so we can enslave alien races to work for us. That is the only way we can expand my friend.

I don't want to hear problems, just solutions.

Chinny for Minister for Interplanetary Disapora.

Despite it's annoying title this video is acebest. Proper old fuddy maths man teaching you wonderful things that can't be on tv because it evolves (a tiny amount of) maths.

'Steady growth' is a more reassuring term of exponential growth. And If our economy is based on steady growth we are fucked. It's completely unsustainable.

There is no escaping the fact that we have to base the world economy on something that isn't steady growth. Or we are fucked.

Here is a good rule of thumb, if someone says something like 'a steady growth of 5%' immediately divide 70 by that percentage. So in this case 70/5 is 14. Which means that the steady growth will lead to the amount doubling every 14 years.

I'm sure I've made this post before.

Speaking as someone who works in regulation, I most heartily disagree.

I don't have it to hand, but there was a recent article in the economic press that basically took apart that initial article that you linked to and kicked the ever loving shit out of it, as it was written by someone with the economic sense of a dead bluebottle.

Or, just someone who doesn't understand the meaning of the word 'growth'.

Hmm, or was that article written by someone with an extreme case of denial and an interest in maintaining business as usual for as long as possible?

You can't really deny the direct relationship between economic expansion and increased demand for resources. Just look at what has happened to the oil price and cost of shipping (the "Baltic Dry exchange") since the depression started. It will shoot back up again once "growth" is restored and consumer confidence increases and gazillions of tonnes of manufactured crap starts being demanded again.

I'm struggling to understand that too. "Growth" in some industries and under some circumstances can just equal "keeping up with inflation", but for the vast majority of firms, "growth" implies more resource consumption. For the markets to be happy with Apple, they need to sell more laptops, iPods, and other stuff next year; their suppliers need to make more of them, which means their suppliers need to harvest more metals and plastics. They all need to use more fuel to move stuff around. At the other end of the chain, obsolete Apple kit needs to be broken down; mostly it ends up in landfill, which consumes more natural resources (in the land taken up, groundwaters contaminated by toxic chemical leakage, and so on).

Seems to me this is true of any firm that makes stuff, which is most firms really. From Coca-Cola to Nike via MacDonalds and Electonic Arts, they all need to consume raw materials and output consumer goods. Indeed, the most fundamental definition of economics I've ever seen is from Lional Robbins; "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." Modern economics is designed to reward firms which make the most efficient use of scarce means, but modern financial structures only reward growth; witness the decline in Microsoft's share price, a firm that makes billions of dollars a year but has flat growth prospects because they are at market saturation in almost every sector.

Growth surely must lead to enhanced consumption? How do you refute this, Curio?

Let's consider Wikipedia: