Britain faces deflation !!!

baby_boomer

This is Rees Mogg as late as 22 September 2008

The Times

"....Europe understands inflation. The Bank of England sympathises with the European view, though there are still members of the Government who want to cut taxes or raise public expenditure. I am glad, in these circumstances, that interest rate policy is in the hands of the Bank of England."

Still worrying about inflation. Does he not understand his own book?

Generali

baby_boomer wrote: »

This is Rees Mogg as late as 22 September 2008

The Times

"....Europe understands inflation. The Bank of England sympathises with the European view, though there are still members of the Government who want to cut taxes or raise public expenditure. I am glad, in these circumstances, that interest rate policy is in the hands of the Bank of England."

Still worrying about inflation. Does he not understand his own book?

IIRC, he called the start of a depression in the mid-90s, just as Mr Lamont's fabled 'Green Shoots of Recovery' finally started to show through and in fact pretty quickly start to bear fruit.

It is a very interesting book and makes many good points but it was timed appallingly.

dopester

Cold but not heartless. TBH I can't understand what boost you think investment in public schools and hospital projects would bring about?

Maybe for future gains, but hasn't Labour already done that during the past 11 years? Pumped in loads of investment/debt in to the system.

Spending reform is needed in my opinion. Smaller government for a start. Tbh I think we're going to see the end of the welfare state because of the debt levels the government and society has taken on..

baby_boomer wrote: »

This is Rees Mogg as late as 22 September 2008

Europe understands inflation? Germany understands inflation and has painful memories of it.

Perhaps Dale Davidson had more influence with it, but even in the book Rees-Mogg did learn more to the inflationary view.

Lord Rees-Mogg leans more to the view that governments will press blindly ahead with inflation, in spite of the destruction that would involve. James Dale Davidson believes that the costs of ruthless inflation will be higher and more obvious early in the process, thus short circuiting the reflation. But those are both weightings of probabilities divorced from the knowledge of the actual details of the immediate market setting in which the decisions will be made.

Sir_Humphrey

I am in the deflation camp. I expect some deficit spending straight away. Once the economy recovers, I expect increases in tax to decrease the national debt. Again this is good counter-cyclical policy, as those tax rises would reduce the size of any further boom/bubble.

dopester

Generali wrote: »

IIRC, he called the start of a depression in the mid-90s, just as Mr Lamont's fabled 'Green Shoots of Recovery' finally started to show through and in fact pretty quickly start to bear fruit.

It is a very interesting book and makes many good points but it was timed appallingly.

It is what... just 8 years out for the events currently unfolding? Before 2000. So it is 2008.

They did leave a proviso there could be a renewed boom/inflationary period. I've not read any other financial projection book where they have issued clear warnings of what may happen with such clarity.... banks going under / government nationalising banks and insurance firms - and everything else... such as "Chapter 7: Muhammad Replaces Marx" - and warnings of terrorism from Islamic extremists as the world.

Generali

dopester wrote: »

It is what... just 8 years out for the events currently unfolding? Before 2000. So it is 2008.

They did leave a proviso there could be a renewed boom/inflationary period. I've not read any other financial projection book where they have issued clear warnings of what may happen with such clarity.... banks going under / government nationalising banks and insurance firms - and everything else... such as "Chapter 7: Muhammad Replaces Marx" - and warnings of terrorism from Islamic extremists as the world.

Another way to look at it is 14 years for them to start unfolding rather than 6 for them to be done and dusted.

It is a thought provoking read though.

neverdespairgirl

Sir_Humphrey wrote: »

. Once the economy recovers, I expect increases in tax to decrease the national debt. Again this is good counter-cyclical policy, as those tax rises would reduce the size of any further boom/bubble.

The trouble is, we've had terrible counter-cyclical policy up to now. The national debt (incl. the "off the balance sheet" GB hypocritically pretends to despise) has not been paid off during the good years.

dopester

Pretty unfair that 14 year statement, unless you expected all their predictions to happen immediately. They wrote what they believed would happen within 8 years.

Well some of their predictions were near enough bang on. Islamic terrorist attacks on the West in 2001. That is just a year out from their calls and their indepth reasoning - or absolutely right if you include the earlier attack on WTC.

We are now seeing their projections of banks failing and being nationalised not long after.

Correct me if I'm wrong.... but big-name banks failing / being nationalised / being bailed out it isn't exactly something you see in the UK / USA that often - or is it ?????? And as it was 2007 when the crunch really started... so 7 years actually.. isn't too far out.

Sir_Humphrey

neverdespairgirl wrote: »

The trouble is, we've had terrible counter-cyclical policy up to now. The national debt (incl. the "off the balance sheet GB hypocritically pretends to despise) has not been paid off during the good years.

Agree totally. Brown either had to keep spending lower, or increase taxes (or a mixture of both).

Food for thought during the bext boom when some cheap politico promises "to share the proceeds of growth" (sic)

Counter-cyclical policy is unpopular, as the lack of "thanks" for my posts suggesting it go to show. This is because people do not understand that running a country is completely different from running one's personal finances.

WTF?_2

Sir_Humphrey wrote: »

Counter-cyclical policy is unpopular, as the lack of "thanks" for my posts suggesting it go to show. This is because people do not understand that running a country is completely different from running one's personal finances.

You've said this before - you seem to think that governments can simply borrow endlessly which is not the case.

They can certainly get away with running deficits for longer than individuals could but as the national debt increases, so does the cost of servicing it which starts to drag on growth and spending. Ultimately the country will be mired in so much debt that potential buyers of government bonds will start to shy away and or demand higher rates of return for the risk of default - which will put more downward pressure on productivity.

Countries can go broke too, not just individuals.