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Larry's Codpiece.
08 Dec 09 09:47
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Date Joined: 03 Dec 06
| Topic/replies: 1,696 | Blogger: Larry's Codpiece.'s blog
Reform, a cross-party think-tank, said that whoever wins the next general election should make cuts in the public sector equal to cutting one in six public sector jobs, including doctors, nurses, police and teachers............The Government will borrow more than £175 billion this year and the national debt is on course to reach £1.4 trillion in four years.

Reform suggested that rebalancing the budget will require a 15 per cent cut in the total public sector wage bill, saving around £27 billion a year.

That would be the equivalent of reducing total public sector employment by 1 million jobs.

Reform calculated that in the last ten years, public sector employment has grown by 16 percent, from 5.2 million to 6 million. Both the NHS and the police have had 30 per cent increase in staff numbers.
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Report HarryCrumb December 8, 2009 6:24 PM GMT
By your logic why not give all the unemployed jobs in the Public Sector. Think of all the benefits costs you would save and all that extra tax revenue. Write and suggest it to Gordon he is stupid enough to try it.
Report Ronaldinho's dentist December 8, 2009 6:25 PM GMT
there do seem to be a lot of people who think a million jobs can be cut and services will only be slightly affected, think harder
Report Ronaldinho's dentist December 8, 2009 6:27 PM GMT
give them jobs in banking
Report Larry's Codpiece. December 8, 2009 6:27 PM GMT
Harry

I was just about to post exactly that when I read that you had already expressed the sentiment. Of course you don't need to worry about that because there isn't much chance of getting most of the lazy feckers out of bed unless the remote is on the other side of the room and Jeremy Kyle is about to start.
Report HarryCrumb December 8, 2009 6:27 PM GMT
I dont. I know services will be affected but that doesnt change the fact that it has to happen.
Report salmon spray December 8, 2009 6:41 PM GMT
Of course to an extent governments have been doing that since the 70s. Training schemes of various sorts, plus the massive expansion in both f/t FE and HE have kept the unemployment figures artificially low for decades.
Report HarryCrumb December 8, 2009 6:49 PM GMT
Yes absolutely . I remember when only the clever kids were allowed to do A levels let alone go to university. I think its as much about keeping them off the unemployment counts as it is about actually educating them in something useful.
Report Ronaldinho's dentist December 8, 2009 7:50 PM GMT
is that their fault? no, its those intelligent enough to have very highly paid jobs to create the current situation and who suffers?

"lazy feckers"

a truly lazy comment aimed at public sector workers by the truly and genuinely ignorant
Report Larry's Codpiece. December 8, 2009 7:54 PM GMT
I'm not talking about public sector workers. I am talking about the workshy unemployed who for the last decade have sat on their arrises getting fat enough so that they could claim DLA while foreign nationals have been flooding into the country to do two or three jobs.
Report Ronaldinho's dentist December 8, 2009 8:00 PM GMT
my apologies Larry
Report Larry's Codpiece. December 8, 2009 10:05 PM GMT
Always nice to converse with a gentleman of the left and not the usual riff raff. :)

Apology accepted.
Report zilzal1 December 8, 2009 10:49 PM GMT
As ive said before, no other country owes UK PLC a god given divine right to a certain standard of living. The way we have conducted our affairs since the sixties is simply unaffordable.
Report Larry's Codpiece. December 8, 2009 10:54 PM GMT
Exactly. Strap yourselves in because this ride is about to get very bumpy.
Report Ronaldinho's dentist December 8, 2009 11:07 PM GMT
unless your a banker or an MP
Report DonWarro December 8, 2009 11:08 PM GMT
personally i think its going to get very rough for them too in due course.
Report zilzal1 December 8, 2009 11:14 PM GMT
Can we all just produce a lot of sprogs and get this


http://www.dailymail.co.uk/news/article-1231795/Taxpayers-pay-1-600-week-family-ex-asylum-seekers-live-luxury-storey-home.html


Limit child benefit to two kids for a start

If you cant feed em, dont breed em
Report Ronaldinho's dentist December 8, 2009 11:27 PM GMT
does anyone really think the small cuts in benefits and job losses will make up this deficit? a massive deflection policy by the govt and yet people cant see it. the country wages war, gambles with its wealth and its the public sector and dole scroungers to blame?? what a thick, unthinking nation we have become, a nation of the lost conscience
Report DonWarro December 8, 2009 11:31 PM GMT
does anyone really think the small cuts in benefits and job losses will make up this deficit? no.

a massive deflection policy by the govt and yet people cant see it.

yes. and divide and conquer.

the country wages war, gambles with its wealth and its the public sector and dole scroungers to blame??

you are quite right, but the bloated public sector and scroungers certainly contributed.

what a thick, unthinking nation we have become, a nation of the lost conscience

agree 100%.
Report zilzal1 December 8, 2009 11:32 PM GMT
Nothing will make up this deficit, in around 50 years time we will be on a par with many other countries that we now look down on.

As ive said before, we have no god given right to a better standard of living than anyone else
Report salmon spray December 8, 2009 11:42 PM GMT
Actually the National Debt has been a cause of grave concern from time to time from the 18th century onwards. There was one before that but nobody had invented the term. Give it a year and this will have disappeared from the public consciousness.
Report subversion December 9, 2009 12:21 AM GMT
lol salmon spray, that attitude is why the IMF normally have to get involved whenever dumb lefties are in charge :D
Report subversion December 9, 2009 12:25 AM GMT
and heres a reason why its different now than in the 18th century

Britain was an economic and military superpower then

it isn't now... it has to compete on a much more level playing field for the worlds dwindling resources

the UK is no longer self-sufficient in oil, energy, food etc etc... you think our standard of life will be maintained in this environment if our currency and govt bonds are reduced to toilet paper?
Report golfjudge December 9, 2009 11:08 PM GMT
Interesting that EO's Telegraph c & p calls Reform 'cross-party', when their deputy director is a Tory candidate at the next election.

Anyway, in the spirit of the cut and paste from thinktanks, here's an alternative way of slashing the deficit from the proudly left-wing Compass think-tank.

1. Introduce a 50% Income Tax band for gross incomes above £100,000. This raises £4.7 billion compared with the current (2009/10) tax system, or an extra £2.3 billion compared with introducing this band at £150,000 as proposed by the Chancellor.

2. Uncap National Insurance Contributions (NICs) such that they are paid at 11% all the way up the income scale (although pensioners would continue to be exempt); make NICs payable on investment income. This results in further revenue of £9.1 billion.

3. In addition to (1) above, introduce minimum tax rates of 40% and 50% on incomes of above £100,000 and £150,000 respectively; these raise an additional £14.9 billion.

4. Introduce a special lower tax band of 10% below the poverty line (below £13,500 per annum), while restoring the
Report golfjudge December 9, 2009 11:09 PM GMT
http://taxjustice.blogspot.com/2009/11/in-place-of-cuts.html
Report Larry's Codpiece. December 9, 2009 11:16 PM GMT
golfjudge

Interesting that EO's Telegraph c & p calls Reform 'cross-party', when their deputy director is a Tory candidate at the next election.

What a curious thing to say. I can only assume that you don't know what cross-party means.
Report Chippie in Whitehall December 9, 2009 11:16 PM GMT
1. Introduce a 50% Income Tax band for gross incomes above £100,000.

2. Uncap National Insurance Contributions (NICs) such that they are paid at 11% all the way up the income scale.

3. In addition to (1) above, introduce minimum tax rates of 40% and 50% on incomes of above £100,000 and £150,000 respectively.

5. Increase the tax payable (higher multipliers) for houses in Council Tax bands E through H.

6. Minimise personal and corporate tax avoidance by requiring tax havens to disclose information fully and changing the definition of
Report golfjudge December 9, 2009 11:17 PM GMT
So how many Labour MPs are there on Reform's board, EO?
Report Larry's Codpiece. December 9, 2009 11:18 PM GMT
1. Introduce a 50% Income Tax band for gross incomes above £100,000. This raises £4.7 billion compared with the current (2009/10) tax system, or an extra £2.3 billion compared with introducing this band at £150,000 as proposed by the Chancellor.

This assumes that you will get all that money. It makes no allowance for people finding ways around the law or just taking up residence elsewhere.
Report Larry's Codpiece. December 9, 2009 11:19 PM GMT
I've no idea. I didn't call describe it as cross party. How many Tory MP's are there?
Report Larry's Codpiece. December 9, 2009 11:22 PM GMT
I can certainly sign up to 8 but Chippie makes a fair point. Instead of all that fannnying around why don't you just say, "we are going to squeeze those on over £100,000 until the pips squeak"?
Report golfjudge December 9, 2009 11:22 PM GMT
Because that would be silly, and counterproductive, Chippie.

Why would we want to reduce demand by taxing or cutting the services of the bottom 90%, who tend to spend most of what they have? Its quite clear who has benefitted most from three decades of financial capitalism. Its only fair they help pay our way through the resulting recession.
Report golfjudge December 9, 2009 11:24 PM GMT
This assumes that you will get all that money. It makes no allowance for people finding ways around the law or just taking up residence elsewhere.

Which are dealt with in 6, 8 and 9.
Report Chippie in Whitehall December 9, 2009 11:26 PM GMT
Not if they have left the country.
Report golfjudge December 9, 2009 11:27 PM GMT
That old chestnut. Where are they going?

Dubai? Mainland Europe with its more progressive tax systems? Obama's America?
Report Chippie in Whitehall December 9, 2009 11:29 PM GMT
They can retire to anywhere they like. As you say they have done very well over the last few decades, no point in continuing to work when the state is bleeding you dry.
Report Chippie in Whitehall December 9, 2009 11:30 PM GMT
Hong Kong has no plans that I am aware of to increase its 20% flat tax neither. There is always somewhere.
Report Chippie in Whitehall December 9, 2009 11:34 PM GMT
Switwerland, Norway and New Zealand also have a lot lower rates than we do presently, let alone after all these increases. Those countries also have lower crime rates and a better overall standard of living than the EU and the USA. How many options do you need? ;)
Report golfjudge December 9, 2009 11:34 PM GMT
Instead of all that fannnying around why don't you just say, "we are going to squeeze those on over £100,000 until the pips squeak

Because clearly the pain is not being shared equally by all people earning over 100K. Someone on 120K without a huge house, investments or tax avoidance scheme is going to get a vastly smaller increase than someone on 500K with all of the above.
Report golfjudge December 9, 2009 11:39 PM GMT
We hear it all the time, Chippie. The bottom line is that if there is money to be made, people will go there to make it. I grant you there's a line, but I don't think these proposals even come close to crossing it. All of these people will remain rich, and making a nice living out of the UK.

None of this is going to destroy London's unique historical advantages, and as for the transaction tax, I note Nancy Pelosi is talking it up now. Every chance of international agreement within the next few years.
Report Larry's Codpiece. December 9, 2009 11:48 PM GMT
Golfjudge

A genuine question as I know you have lots of statistics at your finger tips.

Assuming we do all the things which you suggest and assuming we take one of these people on £500,000 with a nice house and investments. Out of every pound he earns when you take away all the taxes he will have to pay how much of his pound will be left for himself?

If you can please include things like national insurance, VAT and charges on his income from his investments and other tax clawbacks.

Even a rough estimate would be enlightening.
Report golfjudge December 9, 2009 11:50 PM GMT
I don't have stats at my fingertips. I just copied this from the Tax Justice blog - link above.

I'll have a quick scour.
Report Larry's Codpiece. December 9, 2009 11:53 PM GMT
Thanks for that. Obviously I mean with this new 50 pence rate included.
Report mightymoyes December 10, 2009 12:12 AM GMT
he has more than enough left.
Report golfjudge December 10, 2009 12:15 AM GMT
Assuming we do all the things which you suggest and assuming we take one of these people on £500,000 with a nice house and investments. Out of every pound he earns when you take away all the taxes he will have to pay how much of his pound will be left for himself?

If you can please include things like national insurance, VAT and charges on his income from his investments and other tax clawbacks.


Without reading the whole report, I don't see that any such exact calculation has been made for your specific character. I can't really see how coming to an exact figure would be possible without knowing the exact circumstances, or what his overall % rate is now. For instance, if the investments earn less than £110pw he isn't going to be hit by the NI on investments.

There is one table in there, however, that shows the income changes for each decile of the population. This is, I think, for all the measures besides tax avoidance. They estimate that the top 10% on average, are 12.6% worse off, while every other decile is better off. Clearly though, the people nearer 100K without any investments etc are going to be affected vastly less than that, while someone with all of the above will be hit much harder.
Report Larry's Codpiece. December 10, 2009 12:40 AM GMT
golfjudge

It was really just an estimate I was looking for to give a general idea but what we can say is that he won't be left with that much out of his pound. Nearly half will go straight away in income tax. A bit more will go for national insurance. If he buys anything then he has VAT to pay. If he is prudent and puts some of his earned income in the bank then he will pay half of any interest he gets on those savings to the government. If he goes for a pint to drown his sorrows he will pay a significant tax on that money, as he will if he fills his car up or buys a packet of cigarettes.

I'm sure I have left plenty out but it is clear that when people say, "it is fair that they pay more" that they are already paying a heck of a lot more than half their income and that this will only go up further. If I was wealthy and mobile there is little chance I would stay in this country to pay for the profligacy of those who don't know how to budget.
Report golfjudge December 10, 2009 1:05 AM GMT
That may very well be your response, and I have no idea about how willing or able you are to move. Plenty of others wouldn't, because they're still earning a chunk or because this just where they want to live. Someone currently clearing 500K, having to take a 20% pay cut to 400K, may still reason that they couldn't earn the same elsewhere. I doubt their quality of life will noticeably deteriorate.

As for fairness, is it fair that people on 21K get a tax rise, or couples on 31K lose tax credits as under the Tory proposal? Its entirely subjective. Never mind the gap between rich and poor, Britain is very unequal between rich and middle, or even super-rich and rich.

As it stands anyway, it may well be that this person would still be paying a smaller proportion of their earnings than a more disadvantaged section of the tax base. Imo, the worst hit are those who aren't rich but aren't poor, yet get clobbered by council tax, NI rises and all the indirect taxes.

Furthermore, this isn't a total analysis of the effect. If by doing this, we stimulate demand and reduce the deficit, business owners and high-paid employees will benefit. Equally, it might be that such changes encourage this person to invest in a more socially productive way. Less incentive for private equity, short-term dealmaking or property accumulation.
Report Larry's Codpiece. December 10, 2009 10:05 AM GMT
golfjudge

Before anybody and I do mean anybody pays a single penny more in tax there should be root and branch reform. Somebody or some people need to go into every single government department and take a chain saw to everything but that which is absolutely necessary to provide the baseline service.

By the way no moving of the gola posts is allowed. A small point but we were discussing somebody earning £500,000 before tax rather than clearing it not that it impacts on my general point.

Speaking of old chestnuts as you do I see you are rolling out the one about stimulating demand. Governments never do that. If anything they shrink demand by shrinking the overall size of the pie. In order to "stimulate" they have to take away from someone who would have been doing something with that money. By the time they have wasted a portion of that money on bureaucracy there is a smaller sum to blow on coke and hookers. Assuming that they don't do something usueful with it like that then all their schemes and plans don't produce a single thing. At best they steal demand from the future.

This is the classical fallacy of Keynesianism and why you and your fellow Keynesians will stand aghast when all this stimulus is removed and the economy goes back into recession. Of course then you will tell us that we didn't stimulate for long enough or that we didn't do it hard enough and the real shame is that government is likely to believe you. Hey but lets look on the bright side becaused there may be another great big war to pull your theory out of the shiit where it belongs.

No personal slight intended.
Report Larry's Codpiece. December 10, 2009 10:08 AM GMT
By the way I do agree with one thing. Property speculation isn't a good thing for people who want the security of owning their own home. Perhpas that should be taxed more heavily and the proceeds spent on building more council houses.
Report golfjudge December 10, 2009 2:11 PM GMT
LC

Before anybody and I do mean anybody pays a single penny more in tax there should be root and branch reform.

I have no problem with reform, but its a different point to balancing the budget right now. Of course, after a period of assessment, I don't doubt there would be room for savings in govt. I note that this Reform proposal isn't saying this is all about savings from bureaucracy. Its quite clear frontline public services will be cut.

A small point but we were discussing somebody earning £500,000 before tax rather than clearing it not that it impacts on my general point.

OK, same applies to someone clearing 250, reduced to 200. They're still very well off, and unlikely to move unless its absolutely certain they will be better off elsewhere.

Speaking of old chestnuts as you do I see you are rolling out the one about stimulating demand. Governments never do that... In order to "stimulate" they have to take away from someone who would have been doing something with that money... Assuming that they don't do something usueful with it like that then all their schemes and plans don't produce a single thing. At best they steal demand from the future.

This is very straightforward. Those proposals are tax changes, rather than schemes, so bureaucracy isn't really an issue. If you increase tax from someone on 25K, who is overwhelmingly likely to spend virtually everything they receive, you cut their demand. If you make a civil servant on 25K unemployed, you cut their demand. Alternatively, I doubt hardly any of the rich people affected by these plans will change their spending habits.

This is the classical fallacy of Keynesianism and why you and your fellow Keynesians will stand aghast when all this stimulus is removed and the economy goes back into recession.

Of course the economy could go back into recession - did anyone ever suggest otherwise? You miss the point about intervention. It is aimed, always, at lessening the worst effects of recession. Imo, things would be far worse, economically and politically, if the state just sat back and watched this carnage spiral.

But there's a wider issue about the various policies during this recession. It seems every day on here, Brown gets a slating for Britain's recovery lagging behind G20 rivals. Yet would any of his right-wing critics adopt the measures taken by other govts? Should we be paying employees to keep staff on like the Germans? Should we have Obama's tax credit for first time buyers? Personally, I agree with the French Finance Minister Christine Lagarde when she says that, rather than a VAT cut, we should have followed their lead and spent our stimulus on increased welfare and infrastructure.

I suspect you wouldn't, in which case perhaps you could explain what the future should hold. These 1M public sector workers - I assume they are going to receive benefits once made unemployed? How will that help the deficit?

I'm glad we broadly agree on the property issue.
Report Larry's Codpiece. December 10, 2009 10:19 PM GMT
golfjudge

I suspect you wouldn't, in which case perhaps you could explain what the future should hold. These 1M public sector workers - I assume they are going to receive benefits once made unemployed? How will that help the deficit?

I'll do better than that. I'll tell you what the future will hold. We are going to get poorer and we are going to have to cut our cloth accordingly.

There has to come a time and better sooner rather than later that we realise that we can't afford to live beyond our means any more. Within that we have to realise the limits of government and how much more limited government should be. Amongst this there is going to have to be root and branch reform of benefits.

You and your socialist chums have had your day I'm afraid. In one respect I wish that wasn't so.
Report Larry's Codpiece. December 10, 2009 10:25 PM GMT
You miss the point about intervention. It is aimed, always, at lessening the worst effects of recession. Imo, things would be far worse, economically and politically, if the state just sat back and watched this carnage spiral.

Of course we are never going to agree on this but history has shown your position to be wrong on every previous occasion. Recession/depression is a normal part of the economic cycle. Until the disastrous interventions of the Great Depression it was normal to allow a quick collapse of the malinvestments caused by the boom. Intervening merely drags out this process and that is what will happen here.
Report Larry's Codpiece. December 10, 2009 10:28 PM GMT
As for Brown he gets a slating because of his hubris. He told us he had abolished boom and bust. He has regularly told us that his interventions are taking us out of recession when the evidence has shown that every one of the other G20 countries (allowing for their size) has emerged from recession despite stimulating less.
Report golfjudge December 10, 2009 11:36 PM GMT
GJ: These 1M public sector workers - I assume they are going to receive benefits once made unemployed? How will that help the deficit?
LC: I'll do better than that. I'll tell you what the future will hold. We are going to get poorer and we are going to have to cut our cloth accordingly.
There has to come a time and better sooner rather than later that we realise that we can't afford to live beyond our means any more.


That's all well and good with respect to longer term reform, but it doesn't deal with the specific point at hand. If 1M public sector workers are to be sacked, are they going to receive benefits, and if so how will that help the deficit or growth in the short-term?

We've discussed many times various aspects of where the state is too big, where money is wasted, and agree on many of them. We could doubtless find several small ones quickly. But the scale of the immediate problem is bigger than that, and I am trying to establish exactly what we should do today about it.

We know what Tories and Labour think should be done - taxes rising on people around 21K upwards and spending cuts. I say that those who saw so little of the boom shouldn't pay for the resulting bust. Redistribution from those who have fared best during the last few decades is long overdue.

Now, if your alternative is a radical libertarian departure from our current situation, then can you spell out what it means, tomorrow? Do you really think any elected govt is going to stay in power on the line that a depression is a price worth paying to achieve some ideological objective? If none of our rivals follow the same path, how are we going to fare if we stay in recession while they grow?
Report golfjudge December 10, 2009 11:55 PM GMT
You and your socialist chums have had your day I'm afraid

I'd be interested to hear what you mean by 'socialist'.

Surely you didn't mean New Labour, who I despise and are about as socialist as Thatcher? The PBR is a perfect example of how 'we', the Left, haven't had our day. Labour was just given the perfect chance to genuinely redistribute wealth and leave a socialist legacy, and they chose to put taxes up for workers on 21K instead. They have had a chance in the last 2 years to reshape British capitalism, yet we're as owned by the City as ever.

However, if you mean interventionist or Keynesian, then you couldn't be more wrong. Just look at the behaviour of govts around the world. I've already given plenty of examples in Europe, and barely a day goes by where Obama doesn't pursue another left-wing policy - yesterday it was redirecting TARP money to build community hospitals. The fashion for deregulated, neo-liberal economics in Eastern Europe is disintegrating post-Iceland and Ireland. The next phase of Chinese capitalism will be some form of wealth-sharing strategy to create more consumers.

Even in Britain, for all the rhetoric, the Tories will base their growth strategy around state spending. They're already making the case for spending on high-speed rail and broadband, and I expect more on developing engineering. Now if I said that, wouldn't I be condemned for my statism?
Report subversion December 10, 2009 11:55 PM GMT
golfjudge
Do you really think any elected govt is going to stay in power on the line that a depression is a price worth paying to achieve some ideological objective?



and the alternative seems to be that fiscal collapse is a price worth paying to achieve some ideological objective?

who was it who said something like - 'a democratic country is finished when the masses realise they can vote themselves free money for no work'?
Report golfjudge December 11, 2009 12:06 AM GMT
and the alternative seems to be that fiscal collapse is a price worth paying to achieve some ideological objective?

Why is that directed at me? I've already laid out a way of reducing the deficit. I'm awaiting more specifics of EO's alternative.

And are you then saying that all these other countries, who have all tried to stimulate demand, will collapse as a consequence, or is it just Britain?
Report subversion December 11, 2009 12:15 AM GMT
Britain is one of the (if not the single) worst placed of the 'major' economies golfjudge, in my opinion, yes

from the size of the deficit, to the major revenue generating industries (eg finance and oil) under severe pressure, to the government not seeming to care one jot about balancing the books, to the huge off-balance sheet liabilities Brown has landed us with, to import gap staying stubbornly wide even after our currency has tumbled, etc etc etc

the numbers are bad, golfjudge... very, very bad

we need to cut our spending or raise revenue an amount similar to the sum of the entire defence, health and education COMBINED, just to get back to breaking even

something is going to give, and soon
Report golfjudge December 11, 2009 12:33 AM GMT
I don't doubt the severity of it, Sub. And I'm not at any point suggesting that there shouldn't be some cuts. That Compass package laid out above raises a vast sum, and there are doubtless savings to be made in the quangocracy and the corporate state. And yes, there are some benefits - tax credits or winter fuel allowance being paid to people not living in the country, housing benefit reform. Personally, I'd add legalising and taxing prostitution and incrementally, drugs. I don't think dumping 1M workers, including front-line workers, on the dole is going to help anything.

But the bigger question is what is our best route out of it. We need to rebuild exports, more high-value industries rather than the Blatcherite madness of relying on finance and property. My contention is that state spending on public transport, or science, or high-speed broadband, will all help in developing future growth. It is investment, not frivolous spending.

The libertarian position, it would seem, is to 'let the market decide'. In other words just hope that private investment piles into these areas, and carry the risk. I disagree, imo without state guidance that investment is just as likely to pile into hedge funds, property etc.
Report subversion December 11, 2009 12:37 AM GMT
the problem, golfjudge, is trusting the state to spend hard-working peoples money wisely after this decade of total fiscal waste and f*ck-ups

i agree we need infrastructure investment (having spent the last few years in cities like HK and Tokyo, the UK infrastructure seems almost third world in comparison)

however, i simply do not trust this government to do it effectively... chances are they'll just p!ss it away like they did the proceeds of the boom years
Report DonWarro December 11, 2009 12:41 AM GMT
We need to rebuild exports, more high-value industries rather than the Blatcherite madness of relying on finance and property. My contention is that state spending on public transport, or science, or high-speed broadband, will all help in developing future growth. It is investment, not frivolous spending

reduce taxes across the board and the spending is not required since the private sector will spend for you instead. the only solution is to build from the bottom up - ie entrepreneurs and and private industry. at the moment, it's not attractive for people and in many cases simply not possible because of constraints and taxation imposed by big government.

i agree we do need those things you speak of - it's a question of how to get them.
Report DonWarro December 11, 2009 12:48 AM GMT
anyhow, as the currency declines in value, imports will be more difficult as we will have less buying power.

the private sector will pick up the slack if you give it chance. it wants to make profit - it's called incentive. it looks to make money from gaps in the market, and these gaps will become apparent to them once imports fall, as they undoubtedly will do now. then gaps being filled will become a reality if you make it attractive for them, ie low taxation. means more jobs, more exports, low state spending, so high taxation is not required.
Report DonWarro December 11, 2009 12:52 AM GMT
and if you can encourage small business too through low taxation, ie actually making it worthwhile, small businesses will look to fill every niche imaginable. that's what happens in business.

this is how to turn the situation round.
Report golfjudge December 11, 2009 1:06 AM GMT
at the moment, it's not attractive for people and in many cases simply not possible because of constraints and taxation imposed by big government.

I do accept this is true to some extent. Constraints/regulation much more than taxation, but I have every sympathy with small and medium sized business. I have virtually none for multinationals, whose massive avoidance directs the tax burden onto everyone else and cements their advantage.

the private sector will pick up the slack if you give it chance. it wants to make profit - it's called incentive.

Absolutely, and it also needs consumers and the ability to borrow money. It won't get the former if making deep cuts in the spending power of the average person during a recession. And you won't get the latter without having a debt-based economy. How would you go about getting banks to lend to small business right now?

it looks to make money from gaps in the market, and these gaps will become apparent to them once imports fall

This is where we fundamentally disagree. The market is never, and has never been so rational. Many of these projects are risky and long-term. Investors more often want short-term profits, hence the drift of wealth towards private equity and hedge funds. It is this trend in recent decades that has destroyed our manufacturing sector.

When it comes to something like rail, we've seen already that the private sector don't really carry the risk. Because when someone like Metronet fails, the state has no option but to step in. Same as banks for that matter.
Report DonWarro December 11, 2009 1:15 AM GMT
The market is never, and has never been so rational. Many of these projects are risky and long-term.

i would agree with you on this point gj. the point for me is, that the market has never been so rational because there is too much taxation and always has been! and not just that, but easy imports has prevented the need for many niches to be filled locally.

if you were to start a business - you would likely try and find a niche in the market no?

you're right about the risk etc, but if something is potentially more rewarding - because tax is minimal - people will accept greater risk. accepting greater risk means more niches will be filled that otherwise may not have been.

re people need jobs - of course they do. but is it better to stifle industry and therefore natural job creation and force people who have managed to do well to part with half they earn in order to fund projects which may or may not be mismanaged anyway, or is it better to encourage those with money to put that money to work. when putting their money to work, jobs are created if the niches are made attractive.
Report DonWarro December 11, 2009 1:17 AM GMT
re multi nationals - i would suggest that one job government should do is ensure the monopolies are not allowed to be created. big business will still want a piece of the pie given low taxes and will not be deterred by some regulation in this respect.
Report DonWarro December 11, 2009 1:21 AM GMT
How would you go about getting banks to lend to small business right now?

i would get rid of the bank of england. of that means other banks fail, so be it. under the present fiat currency system banks essentially have the power to lend at will. their constraint currently is placed upon them by the central banks, and this is due to most existing banks having been set up under bank of england guidance and individual banks requiring the approval of the bank of england to make loans. most bankers dont realise how it works. remove the bank of england and believe me new banks will open immediately and loan to people. the private sector- in particular those that really understand how money is created (promissory notes etc) would jump at the chance. because there are huge profits to be made long term.
Report DonWarro December 11, 2009 1:26 AM GMT
requiring the approval of the bank of england to make loans

i didnt explain this right. they dont necessarily require the approval although in some cases they do - they require their implied approval given the current process used for creating money via promissory notes. many banks themselves do not appreciate how the money is created - they think the central bank provides the liquidity but this is not true. some existing banks monetise promissory notes themselves (only a few though, due to status and government/bofe approval) - and some monetise them through passing them to another bank who can actually monetise them themselves.
Report golfjudge December 11, 2009 1:30 AM GMT
Don, I'll have a look in tomorrow. Got to get some sleep so as to get up for the golf.
Report DonWarro December 11, 2009 1:33 AM GMT
ok m8. enjoy golf
Report DonWarro December 11, 2009 2:08 AM GMT
re banking - suggest reading unenforceable credit agreeements thread on finance - in particular the 3rd page. i say this because if you say im talking blx about banking this that thread contains a lot of the response that i would have to give you - so im just trying to save us both some time. unless you actually agree with me of course
Report Larry's Codpiece. December 11, 2009 10:37 AM GMT
golfjudge

Why is that directed at me? I've already laid out a way of reducing the deficit. I'm awaiting more specifics of EO's alternative.

I puffed myself up in all my self righteous majesty and was just about to launch into a grand piece when I realised how busy you boys had been last night. Don pretty much presents my view and partially tells you what the problem is and hints at the rest.

The point is that you can't have a mad boom like over the last decade without consequences. The system was already in disrepute long before that time. If you are looking for solutions to this particular problem I am afraid there are none. The only choice which was there was a lot of pain now, with failing banks and even risking meltdown of a corrupt and corrupting system in the short term. Or the alternative of attempting to stave off the problem and in the longer term making it worse. Of course we went for the pain later scenario.

One of the major problems is the whole easy money thing. What you have seen as growth these long years is really just malinvestment, eye watering levels of debt and fevered speculation. Don puts his finger on the problem. If you go back in recent history the banks, the bankers and the central banks are the problem. Find me a war and I will show you a banker with his finger in the pie. The ability of bankers to extort money, money itself being backed by hot air and fractional reserve banking have all played their part.

What you see as wealth I see as a great big pyramid scheme. Debt is not wealth.
Report Larry's Codpiece. December 11, 2009 10:41 AM GMT
And if you want to know how pernicious is the influence of the banks I will give you just one example:

In order to save the same banks which had brought us to our knees governments around the world were willing to promise the future work of millions of people. Not for a fee mind but for absolutely no reward. People will work for hundreds of hours per year for nothing just to pay interest on debts created of which they had no say and no benefit.

How cunning is that?
Report Larry's Codpiece. December 11, 2009 10:43 AM GMT
Once you understand that then everything else will fall into place. Easy money chases easy pickings. It don't matter if they are safe because if it all goes belly up someone else will pick up the tab. That is why you have your speculation on hedge funds etc. You really need to look at things from a different angle.
Report Dr J December 11, 2009 11:00 AM GMT
EO -

Are you aware that there's absolutely nothing in your last three posts that even begins to justify your constant b*tching at socialists? What you describe is simply a failure of an under-regulated market system. How do you reconcile this with your view that 'the socialists have had their go and look what a mess we're in now'? The truth is, most socialists would agree with much of your analysis above. The banks failed because of a misplaced trust in the markets to correct itself in times of trouble.
Report Larry's Codpiece. December 11, 2009 11:07 AM GMT
I'll get back to you on that because I'm out to do some gardening but I don't always go on about socialists - just most of the time. :)

By the way if you think this has nothing to do with socialism what do you call the bailing out of the banks?
Report Dr J December 11, 2009 11:13 AM GMT
The bail-out certainly wasn't an act of socialism. I don't see how anyone could think it was really.

Best of luck gardening in this weather.
Report sibaroni December 11, 2009 11:16 AM GMT
He probably means the QE, which was Keynesian.
Report Dr Crippen December 11, 2009 1:08 PM GMT
You cant blame the whole labour movement and socialism just because this lot has overdone the Keynesianism bit.
Report blackburn1 December 11, 2009 1:29 PM GMT
I was at a forum recently with the leader of the district council

moving forward
transition
progress
change
difficult choices blah blah blah

I dont know how many of these dopes there are but if every one of them vanished nothing would change and we'd save a fortune
Report subversion December 11, 2009 1:36 PM GMT
he probably means the tax and waste policies, which are hallmarks of UK socialism

(at least thats what i mean when i target socialists... if history showed they could spend tax money effectively without p!ssing it away and then bringing the country to its knees financially, there would be less of a problem)
Report golfjudge December 11, 2009 2:24 PM GMT
Chaps, I will post in detail and respond to Don's points about credit etc in due course but extremely busy. Maybe later today, but we've got visitors soon, so probably over the weekend.

Briefly, its hardly fair to call this lot Keynesian. Keynes wasn't too keen on running up a deficit during the boom.

Also, re the bank bailout, this isn't about finding a magical solution, a 'silver bullet'. It is about crisis management, best managing a potentially disastrous situation, one that would have been much worse than any of us have ever seen in our lifetimes. The debate is over whether either short or long-term outcomes would be better or worse than the meltdown we would have seen.
Report golfjudge December 11, 2009 3:35 PM GMT
OK, loads to reply to.

Firstly to Don re banking. I read that page on your financials thread. This I assume ties in with your general theory about common law trumping the Parliament Act? As I've said before to you, if you have incontrovertible evidence of cases recognising this, then I'd be happy to look at them. I don't mean some credit agreements that have been voided because the bank mis-applied laws laid out by Parliament.

To be honest, I don't know if there is a loophole. Here's the thing though, even if was I wouldn't exploit it myself. Not out of principle or anything, but pure self-interest. It would mean I couldn't get credit in future. Moreover, nor would any govt or regime allow any vast number of people exploit such a loophole for any length of time.

Which brings me to the wider point about banks creating credit. Why would I, or most people, be against it? It is through the expansion of credit in the last century that we've established our very high relative standards of living. Its an essential part of a modern consumer capitalist system. Its how companies and countries have expanded their interest overseas. Its how individuals have moved from tenants to owning their own land. Personally, I would still be poor if it wasn't for credit, which allowed me to take risks to improve my situation. A western world that isn't based on credit is one that nobody on this thread has any real concept of.

As for the Bank of England, if we abolished it I suspect money would leave these shores in an instant. Investors need to know there is some stability at the heart of the system.
Report treetop December 11, 2009 3:35 PM GMT
Didnt Keynes have to go cap in hand to the USA to arrange massive borrowings ? Perhaps this lot aren't so different ! I just think that massive borrowing only staves off the day of reckoning and Brown could gain so much credit for acknowledging this problem.
Report golfjudge December 11, 2009 3:50 PM GMT
Right, next the bank bailouts etc.

Don says if banks fail 'so be it'. EO seems to be of the same line, though I think he would protect savers.

Look at the fallout just from Bear Stearne and Lehmans. The consequences of leaving the whole system to collapse, or as EO puts it 'the meltdown of a corrupt system'. are almost impossible to comprehend. It is really not something to be blase about.

Here's what we do know. In such an environment, the only big survivors are those who already have vast swathes of cash. They would snap up all the depreciated assets from themselves. You would see wealth consolidation like never before. Just as the mini-fallout we've seen has already produced more wealth consolidation. I think our world has increasing oligarchich tendencies as it is, this would be on a completely different level. Virutally all the world's valuable resources and markets would be dominated by a very small number of players.

That of course is assuming we ever got there. More likely in the short-term is anarchy. Mass starvation, civil wars etc. And when it kicks off, I assure you that all the vested interests that EO referred to who benefitted from war, will do it all over again. Only the very rich or the very strong have anything to gain from anarchy. Most people hate anarchy, so the chances are instead they'll unite behind an authoritarian dictatorship who restores order. These are the kind of circumstances where a Stalin, Hitler or Pol Pot thrives.

This is why I repeatedly say we can't rewind the clock. And why I ask, what happens tomorrow? What realistic steps can any govt take tomorrow, when their purpose is to maintain order and to represent the interests of people right now, rather than in some abstract future?
Report golfjudge December 11, 2009 4:01 PM GMT
Easy money chases easy pickings. It don't matter if they are safe because if it all goes belly up someone else will pick up the tab. That is why you have your speculation on hedge funds etc.

Of course people chase pickings, and that is why they opt for short-termist financial engineering rather than expensive, long-term real engineering. I disagree that the only reason people invest in hedge funds is because they think the taxpayer stands behind them. Not everyone was bailed out this time nor in the 1990s. The reality is that go back to pre-2007, and virtually nobody in a position of influence in finance ever believed the system could ever collapse in this way.

Anyway, will look in tomorrow.
Report zilzal1 December 11, 2009 4:05 PM GMT
Some good points Golf there as usual- i think that this time will be a lot different than other Recessions as there is so little to play with. We have thrown the kitchen sink at it very early and now the cupboard is bare, We now are in uncharted waters. In the past we have been able to cut interest rates when we are in trouble, we now have reached rock bottom already,We cant now spend our way out because none was put aside during the boom.
We now have in place perfect conditions(once QE has to stop) for massive civil unrest, Im sure you would agree that unemployment(through both governments) has been falsified for a long time, there is now a massive underclass who rely on benefits and half the country is in hock up to their knees in credit cards.
We, imo are heading for either more currency crisis or, if the tories hike interest rates, a severe correction on the housing market, i can see no scheme where we cant avoid one or the other.
Report Larry's Codpiece. December 11, 2009 6:40 PM GMT
golfjudge

By September 2008 with all the fevered speculation I agree that not doing something risked systemic and almost immediate collapse of the banking system. That may have happened. Then again it may not. It may have led to societal breakdown. Then again it may not. It may still happen. On balance I think it is only slightly less likely in the next decade than it was at that time but at what a cost.

I wouldn't have been the best person to advise on saving a system which I think has caused its own problems and which deserves to perish but governments and our government/USA in particular were asleep at the wheel and could have been doing something as long ago as 2006 (of course at the very least they should have done something like regulation of the shadow banking system long before that).

In 2006 100,000 US homes were in foreclosure. At that time the red light was flashing. This had a knock on effect with the securitization markets beginning to close as early as Spring 2007. A flag was now raised up on top of the flashing light. Of course everybody remembers BNP Paribas in August 2007. I certainly do. I can see no reason why our government didn't go into overdrive at this stage. I put my own affairs in order then.

As we can see from the above the time for Gordon Brown to plan for doing, "whatever it takes" was then but even when the outriders began to fall it took nearly 6 months to sort out Northern Rock. I make these points because a popular fallacy seems to be developing that nobody saw it coming. Everybody should have seen it coming and plenty did very early.

At this time they should have been planning for bank failures and big ones. Banks fail all the time. Several hundred will have failed in the US alone this year. Other banks spring up in their place. So this is what should have happened.

In late summer 2007 Brown should have told the British people that several banks would be likely to fail but that the government would guarantee every penny of depositors money. One of two other things should have been done. Your Branson's and others should have been encouraged to set up in business as banks and depositors money should have been lodged with them or the banks left standing. Alternatively and on the basis that in a world where government intervention is everywhere there is a case in this instance of a government backed bank to take in the deposits. I accept that the advantage of this scenario is the additional safety and reassurance which this would have provided. In any case the bad banks should have been allowed to fail along with their malinvestments. No way should the people be having to pay for decades to come for the idiocy of governments and banks.

I accept that this isn't a universally popular solution but here I must stray into Don Warro conspiracy theory territory because I do think that the banks' version of events have been accepted uncritically and this is a testament to their power and influence.

In any case mine is not a lone voice. Nobel Prize winner Joseph Stiglitz advocated just such a scenario. Also Nouriel Roubini who was one of a handful of economists to predict the crisis years ago also advocated something similar in that he suggested splitting the good banks from the bad and refinancing them whilst allowing the bad banks to go under.
Report treetop December 11, 2009 7:02 PM GMT
In late summer 2007 Brown should have told the British people that several banks would be likely to fail but that the government would guarantee every penny of depositors money.

Instead the slimy so and so leaked via the Treasury that Northern Rock, a suitable scapegoat was in trouble and events got out of hand. If this had been handled correctly we may have avoided much of the trouble but getting rid of all the competent staff in the Treasury through previous bullying tantrums meant that only PR and backboneless civil servants were in place to advise him when trouble came. As Chris Mullin said 'all roads lead back to Gordon' even if they were via Peston's dad in the treasury and the BBC.
Report DonWarro December 11, 2009 8:01 PM GMT
thanks for replies gj. i have some for you. not gonna be about for a few days now.

most of the stuff i say though is irrelevant i suspect since powers that be would never approve.

-Briefly, its hardly fair to call this lot Keynesian. Keynes wasn't too keen on running up a deficit during the boom.

when eo says keynesian i would assume he means all the intervention - this has gone on for decades, and gradually got worse.
the government seems to think it can control the economy but all it can really do is fk it up by imposing policies that damage the capability of a free market to act efficiently. they want to help one group - it always hurts someone else and distorts the market. this is a large contribution to how bubbles are created. it is what causes the boom and bust we see in economic cycles based on the present system (because it is based on expanding and then contracting money supply, which is really unnecessary, only one of the tools used to consolidate wealth from the masses, another tool being the bailouts!).

-Also, re the bank bailout, this isn't about finding a magical solution, a 'silver bullet'. It is about crisis management, best managing a potentially disastrous situation, one that would have been much worse than any of us have ever seen in our lifetimes.

you say its about crisis management, and it should be, but it simply wasnt thought through. apart from as usual incurring of huge waste, and money potnetially being invested speculatively rather than to shore things up, and massive expense to the populations future labour for years to come, it ultimately makes things worse anyway by attempting to further inflate the market falsely. you cant delay things for ever and these actions just mean it will just come down harder and sharper when it does. the debt is so big it could happen overnight if our creditors cut us off.

crisis management i agree is essential, but you first need to establish where it is you actually need to be - how to get there comes after. there doesnt seem to be any plan as to where we should be does there? not a sensible one anyway. the plan is - things should get better lol. but how will they if you try to get out of debt with debt. we cant pay it off in this system. start a new one as i suggest in this post, and the first thing we do is finance that debt with our own promissory notes as a populace so we stop paying any interest for one, and secondly, the debt never has to be repaid. it's that simple. but with what we're doing, it will only get worse in the end. what i have said about low taxes and free market environment should be the goal, with it working efficiently. if it could be done and the state of economy improve, ie reduced unemployment etc i assume you would be happy with more limited government, if everyone was looked after who needed to be. finding money for benefits should not be a problem - i tried debating with you before as to where this money comes from - it's the promissory note process, not from taxes. income taxes pay the interest on the debt that's how ridiculous it is.

the crisis management imo should have been a process of how to get there (above). the problem is that the government has no will to do this because of course they would be doing themselves out of a job and the gravy train they enjoy. they know what i am saying is possible. they would much rather grow the government in its power and reach, therefore rewarding themselves and their buyddies along the way, with huge wastage occurring through incompetence which in many cases simply cannot be avoided because the organisation is just so damn big! this system gives certain people control over all of us, control over the financial system, and drains our wealth for their personal gain.

you say bailouts prevented a situation so bad none of us have seen it before - but i tell you now - in our life times we will now see one much worse than even that (because we will stay on this road). it is a foregone conclusion as our economy and its system as has come so far that it is now enroute to self destruction. it is likely unstoppable now as a result of the bailouts pushing into this new ball game. we need to get to a low taxation state as smoothly as we can as quickly as we can - otherwise the whole lot of us will suffer imo.

marx was not wrong when he said capitalism would fail. i guess my system is not really capitalism, it is something slightly different. its certainly not socialism either. more a financial paradise.

-The debate is over whether either short or long-term outcomes would be better or worse than the meltdown we would have seen.

is it? who won? i would say that only the pro government (or gov funded) institutions and think tanks would still say that the bailouts were a good idea (and lets not forget it was these people who advised on policy previously being gov advocates and look what happened). anyone with any real credibility left KNOWS the bailouts were a farce. there were alternatives - such as letting it fail and helping PEOPLE that lost out as a result. would have cost far less imo, and the public would be more happy to help their fellow man than bailout the banks! this could have been used in the interim transition to a state of low taxation like i suggest.

- I wouldn't exploit it myself. Not out of principle or anything, but pure self-interest. It would mean I couldn't get credit in future

not at all. firstly, ANYONE could get whatever credit they wanted if we used this system because we create our own credit lines based on our labour. or you could go further and provide the credit facility to others (you do not need to have what you see as money in order to do this). we are all debtors in commerce the way we currently act. even those who think they have money in the bank and loan it to people are still technically debtors because of how the system works. creditor/debtor is a status and specific actions and forms need to be filed to make you a creditor. governments do recognise creditor status - they have to. getting a bit off track here anyway, so im sorry. id rather concentrate on talking about what you know about so ill stick with that where i can. to be honest, it is very difficult to operate as a creditor - highly skilled - and being a debtor in commerce would be a perfectly acceptable way to operate (and is easier, just slightly less beneficial) provided your not getting ripped off along the way. it could be the economic paradise i speak of.
the next bit follows on from this.

-Which brings me to the wider point about banks creating credit. Why would I, or most people, be against it

im not saying you should be. what im saying is though that you are being grossly overcharged - the banking system is profitting the full amount of the loan plus all interest. the entire amount you repay are simply fees - and i think that is unreasonable. for one, no interest should be required, because the profit is the full "repayment". 2/ the repayment doesnt need to be the full amount of what you "borrowed"! "borrow" 5k, pay back 2.5k only, and no interest for example. overall you have profitted 2.5k and the bank has profitted 2.5k. much fairer, and everyone is more affluent - except the currently greedy banks. set maximum limites on what people can "borrow" through promissory notes - make it an amount that is enough for anyone to live on and buy all basic things they want in the private sector. yes the money supply keeps on expanding, but all debts are paid easily, so people will always be comfortable. expanding money supply would therefore not cause any problem. if people want to borrow more than what they need to comfortably survice, they should ACTUALLY borrow from someone who has the money to lend. in this instance interest is obviously acceptable, because their is actually a liability on the part of the loaning party. no fractionaly reserve sht needed. all the gov needs to do is send a promissory note template to people to complete and sign, and everyone who returns it gets the money in their bank simples. no more starvation. the money supply may even expand less rapidly than it does in our current system anyway but even if it does inflation is no problem. of couse we DO need to get our own industry going so we have something to take to the market place when we're looking for imports.

it's a whole different financial paradigm to what you currently see before you. THIS is how to even things up and bring the equality you desire. a new economic model for you.

-As for the Bank of England, if we abolished it I suspect money would leave these shores in an instant. Investors need to know there is some stability at the heart of the system.

this line is the epitomy of your regrettable misunderstanding of how money really works. the money is our labour. "investors" can take there money off if they want. because we can make our own as a nation anyway without paying bofe interest, using the promissory note process still, but in the way i suggested above. and given that we could do this, the economy would still keep running and likely be more profitable anyway so no private investors would be running away very fast imho. if they did, they would soon be back. if they werent, fk em. we dont need 'em anyway. everybody would have money to spend for essentials! this is what you want no??

-Don says if banks fail 'so be it'

yep. bail out the people that it effects. people will help people and not begrudge taxpayer money being used so much if it was the case - but regardless the gov could create money using promissory notes against us in the same way that the bofe currently does. the one difference of course that they dont rip us off with what they expect to be "repaid". we do not need to look outside of this country to borrow money - we can create it ourselves. there is no need for interest either, like we pay bofe.

-Here's what we do know. In such an environment, the only big survivors are those who already have vast swathes of cash. They would snap up all the depreciated assets from themselves. You would see wealth consolidation like never before. Just as the mini-fallout we've seen has already produced more wealth consolidation. I think our world has increasing oligarchich tendencies as it is, this would be on a completely different level. Virutally all the world's valuable resources and markets would be dominated by a very small number of players.

like you say this is exactly what is happening with what the gov IS doing. do it my way and change the game completely - there would be no situation of investor money leaving and it wouldnt be a prob if it did. . the oligarch tendencies you see - these are the result of the policies you suggest together with the money creation scam that is being pulled on us.

use promissory notes properly and fairly and you avoud the anarchy etc. but of course no gov will ever do that because they will not be allowed to by the hidden powers who benefit so greatly from the current way they operate...scamming us all.

-The reality is that go back to pre-2007, and virtually nobody in a position of influence in finance ever believed the system could ever collapse in this way.

i find that hard to believe. they may not have admitted it (maybe they didnt know enough about prom notes etc to be able to offer a solution so better to not scare people), but i find it impossible to think none of these people foresaw the possibility.


re providing proof re my promissory note theories and common law etc - i am working on it believe me.

of course during the next few years whilst big government is still at the helm, there is no way they will consider any of the things i have suggested. not even the low tax environment target i suggest for reasons i eluded too and certainly not the promissory note stuff. that's not meant for us commoners. so, as a result of the policies they take which you will probably defend, we WILL see mass civil unrest, high unemployment and starvation, house price decline etc anyway. hence im leaving. if i tried to push these ideas publicly i would prob be silenced i expect since the biggest powers across the world would lose their huge advantage. if by some miracle they wanted to implement my system - of course it would need to be set as a goal and some sort of transition phase agreed upon. again though, pretty easy if you use promissory notes properly.

EVEN IF today's loans dont work by the promissory loans process i suggest they do, it could still be implemented and work no? double entry acccounting makes it possible. it's when this was introduced that this banking scam started.

this got rather long so i could have made all sorts of mistakes. hope not :)
Report DonWarro December 11, 2009 8:07 PM GMT
we cannot keep growing government. as IT grows and contributes a larger percentage of the economy, by definition the the private sector decreases at a rate equal to that amount. we are near a point where what is left of the private sector cannot support the public sector.

anyone for a new system? mine even keeps the lampus' of this world happy.

i think i may have made one mistake above - and you'll have to forgive me because creating such a theory is a daunting task as im sure you will agree. limit on self funded loans should be a level that allows survival. not too generous though so that people still have an incentive to work and create something. it would be so achieveable this way that even the currently lazy may see it as worth it. if we did this we would be back to the best lifestyle in the world. of course we would need to halt any more immigration in terms of allowing anyone else to join the society unless the rest of the world did the same. but why wouldnt they do the same if they saw how good it was.. immigration would no longer be a problem would it. this whole theory could solve everything..
Report DonWarro December 11, 2009 8:10 PM GMT
to anyone else reading.

to understand any of this theory, u need to read page 3 of unenforceable credit agreements thread on financials- about how loans work (or could work, although i believe it is actually the former) and promissory notes.
Report DonWarro December 11, 2009 8:13 PM GMT
pls highlight flaws as you see them so i can spend some time considering them
Report DonWarro December 11, 2009 8:15 PM GMT
imho its my way or big government totalitarian state. i could be wrong though.
Report golfjudge December 13, 2009 11:34 AM GMT
Chaps, lots of points to respond to and many of them crossover. So let me know if I've missed something.

First and foremost, beyond the wider issue of whether there should have been any bailout/govt action, don't for a second imagine that I support the way it has been done, or that I don't entirely agree that the response has been ill-thought through, often poorly implemented and ultimately corrupt. I will return to this, and alternatives, in due course.

However, it is easy to have this discussion with hindsight. EO raises the looming housing crisis in the US in 2006, and there certainly were warning signs. There are numerous people who saw this coming, from right across the political spectrum. But equally, the housing booms aren't the entire problem, they're a symptom of a wider madness. The RBS takeover of ABN Amro is a key ingredient of their collapse, and this bigger than ever takeover took place in October 2007, well into the crisis. Barclays were also in the running.

I don't recall any significant political disagreement over it. There was a consensus amongst govt, media and finance that deregulated finance capitalism was a never-ending goldmine. Anyone who had talked about intervening in that or any of the regular mergers and takeovers so loved by the City would have been condemned as 'statist', or as Sir Fred called internal sceptics at RBS, the 'anti-enterprise unit'. The same applies for regulating the shadow banking system. Financial derivatives had been allowed to develop seemingly without regulators and rating agencies entirely understanding them.

That consensus also extend to other pivotal areas related to the crisis. People like Kirsty Allsop, then Tory housing adviser, were still saying 'house prices can rise forever' in 2007. No wonder the Tories were basically matching Labour's spending plans - they all thought there was an endless revenue of taxes from finance and housing. Now of course they've dried up - cue the deficit.
Report treetop December 13, 2009 11:39 AM GMT
Financial derivatives had been allowed to develop seemingly without regulators and rating agencies entirely understanding them.


Is this not a damning statement gj ? Why set up the FSA if it is not staffed with at least one or two senior people with intelligence to undertand the markets and regulate accordingly ? This watchdog that never barked had ample opportunity to intervene and raise the danger signs but never did until well after the event.
Report golfjudge December 13, 2009 12:08 PM GMT
Re solutions/alternatives

EO raises this idea of separating depositors cash, while letting the rest fail. I'm tempted by the wider argument raised by Cable etc about separating retail from investment banks, though not entirely sure about the details and efficacy.

But in the crisis, I still don't think letting the investments fail was really an option. If the collapse of Lehmans can cause a global recession, imagine how much worse a wider collapse would be? The spiral of default could have poisoned everything. At least now, while I agree things will get much worse, most investors have a basic confidence in the system.

Has that system been engineered by a self-serving financial elite? Definitely. Such is the way of humanity. Whoever holds real power in any socio-economic system gets to exercise it, whether that be energy or financial interests, landowners or even occasionally trade unions. No system is perfectable or incorruptable. The one we have now, a modern consumer capitalist economy alongside a public sector, has survived a long time and whatever its faults, has produced an unprecedented era of peace and prosperity for most of us in the West.

Just how bad it gets we can only guess. I don't however share Don's view that the system is going to collapse completely. This crisis has illustrated just how interdependent the world has become. Countries with very different approaches all suffer - Germany doesn't have our housing obsession, our credit cards, or our deregulated financial system, yet falls into recession because UK and US consumers can't afford their goods. China shed tens of millions of jobs, prompting massive government spending programmes to fill the gap. If investors lose faith in our currency, where do they go? Nobody is immune, and whatever is done is going to require some basic level of co-ordination between countries. The collapse of the West is in nobody's interest, not least those govts and foreign investors holding Western assets.
Report golfjudge December 13, 2009 12:13 PM GMT
Is this not a damning statement gj ? Why set up the FSA if it is not staffed with at least one or two senior people with intelligence to undertand the markets and regulate accordingly ?

It certainly is damning, treetop, but it goes a lot wider than the UK or the FSA. The US ratings agencies had a blatant conflict of interest in signing off products from institutions that were already clients. And the bottom line is that derivatives traders earn a lot, lot more than regulators. The regulators are never going to get the best staff. Its pointless trying to boil this down to individual govts or agencies. The problem is far deeper, and ultimately boils down imo to an elite consensus that has fallen apart.
Report subversion December 13, 2009 12:34 PM GMT
golfjudge 13 Dec 13:13
And the bottom line is that derivatives traders earn a lot, lot more than regulators. The regulators are never going to get the best staff



you've nailed it in one there. i've known stories of regulators taking aside IBank insiders and enquiring about jobs when on their regulatory visits to the IBanks

'regulatory capture'... no question that it happened in this case
Report golfjudge December 13, 2009 12:48 PM GMT
Don

crisis management i agree is essential, but you first need to establish where it is you actually need to be - how to get there comes after. there doesnt seem to be any plan as to where we should be does there? not a sensible one anyway.

Agreed,

how will they if you try to get out of debt with debt. we cant pay it off in this system.

Its not really as simple as that. Clearly it is perfectly possible for governments to manage debt. We, and most other countries, have carried 30-50% of national debt for as long as I can remember, and still grown and become richer over time. The issue is whether you can carry the vast debts that have now been accrued. I suspect the US can, not so the UK. Because US fortunes are the key to the world economy, peace and security etc, the rest of the world have a vested interest in their survival.

But on any level, debt can be cut in the long-term by taking on more in the short-term. It just depends whether you have the right plan.

this system gives certain people control over all of us, control over the financial system, and drains our wealth for their personal gain.
the oligarch tendencies you see - these are the result of the policies you suggest together with the money creation scam that is being pulled on us.

See my penultimate post. Whatever system you have, those with real power will be able to engineer it to their advantage. There are always oligarchical tendencies whatever the system.

So having a system where banks create money might indeed make them a fortune, and an exploitative, corrupt relationship in relation the economy and govt, but it still may be the case that we are better off as a consequence. Because the alternative system would have its own flaws, and may ultimately be less productive.

GJ: -The debate is over whether either short or long-term outcomes would be better or worse than the meltdown we would have seen.
DW: is it? who won? i would say that only the pro government (or gov funded) institutions and think tanks would still say that the bailouts were a good idea


I wasn't suggesting anyone had 'won'. I'm saying that is the core debate that lies behind these disputes over whether there should have been a bailout. Not though the debate about whether it could have been done differently.

Here, I'm pleasantly surprised we find ourselves in some rare agreement. I would certainly consider bailing out the people affected, rather than the banks. I should point out here that had the Left said that, we would have been condemned for promoting moral hazard. I assume you're no supporter of Obama's foreclosure relief?

this line is the epitomy of your regrettable misunderstanding of how money really works. the money is our labour. "investors" can take there money off if they want. because we can make our own as a nation anyway without paying bofe interest,

But we can't make our way as a nation without the outside world. We import and export, as always, and are going to continue to do so. Those investors help create jobs and wealth. They own vast swathes of our economy, just as we own assets overseas. If they decide to leave en masse because they've lost confidence in our system, we'll be much poorer for it.

As for your wider alternative approach, I'll get back to it later. Very deep subject!
Report Burt06 September 23, 2016 12:13 AM BST
ONLY 1 MILLION?Shocked
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