Public finances: The chickens coming home to roost

Wookster

Rochdale_Pioneers wrote: »

We'll continue to borrow. We're up to 47% on UK measure - so thats about 51% on my preferred Eurostat measure that includes PFI and net banking liabilities. Thats still not a lot vs France Germany Japan America etc etc.

The way some of you are talking there will need to be sweeping cuts in public services and in pension provisions in the public sector. Can I give you a reality check - the Conservative party is NOT going to run on that platform. Nor is it ever going to implement such a thing. In 1979 the country was far more broken than it is now, and yet Thatcher managed to increase investment into social security and the welfare state every single year of her reign. The idea that Cameron is going to take an axe to services is no more than a right-whinge squelchy pants dream.

You can rant and rave but the simple fact is borrowing cannot go on indefinitely at the rate it has increased to for too much longer. It is simply unsustainable. People will start to lend to other places perceived to be more prudently managed and less likely to default.

If you look at the fundamentals, they are set to get significantly worse - unemployment has not even come close to peaking - the impact of this alone on the public purse will be huge.

We are running the second largest deficit in the world, behind the US - it just simply cannot go on at this rate indefinitely!

nickmason

Rochdale_Pioneers wrote: »

They have realised that Clarke has gravitas, public respect, a common touch, an easy communication style and knows what he is talking about, and that Gideon doesn't.

Poor Gideon. Once the photos of him in the Bullingdon gear came out (and the story of what they called him), he never recovered. Ultimately people want someone they can relate to as guides through the economics. "Oik" in his rah rah gear loving it up on russian oligarchs yachts is never going to compete with "I like food" in his hush puppies.

It's interesting - in some ways he's like Cameron's Mandelson. An easy target (possibly because someone needs to be a target for the ammunition to come out, at which stage the targetting becomes easier, and so it snowballs). And it's interesting that the oligarch smear that you use fits so well for Mandy.

But Osborne is also a key part of the Cameron team, in part for his fixing (cf Mandelson) and in no small part for his intellect. Labour have been targetting him because
1) they know he's important
2) they know that he's not winning the media/public perception battle.

Somebody earlier noted that politicians should be doing what is right for the country, a sentiment I absolutely applaud. Filling the next government with communicators, rather than thinkers and doers, is not actually the key to solving the country, even if it might be the best way to get into that position.

Back to your comparisons between Clarke (and I welcome his return hugely, for the communication value he brings in portraying this government in its real light) and Osborne:

"Clarke has gravitas, public respect, a common touch, an easy communication style and knows what he is talking about, and that Gideon doesn't."

Frankly, all of those are about communication (apart from the misleading bit about "knows what he is talking about"; Osborne's grasp of economics is undoubtedly superior to Clarke's).

I'm not Osborne's biggest fan. But when he is attacked for a weakness that is not the most important element to being a good politician, it seems right to defend him for his qualities and value.

nickmason

LauraW10 wrote: »

As long as you don't lose your job - and that will be most of us; people will just get on with there lives and they won't even notice.

Nonsense. On stilts, etc.

LauraW10 wrote: »

You should get out abit more (if you don't actually have a life outside MSE - be a devil and try another board) - live a little and stop wallowing in gloom. Life is very short and very precious - ask Jade Goody.

Whereas that is very sage. There is something of (tragic) poetry about the whole Jade Goody saga, as all the hubris of the recent bubble comes home to roost, there is someone who is quite clearly saying "the party's nearly over, but I'm going to do what I can - fairly, honestly - for my family."

I can see why Gordon Brown has decided to take her as his latest icon of courage.

Cannon_Fodder

Rochdale_Pioneers wrote: »

"Oik" in his rah rah gear loving it up on russian oligarchs yachts

Usual left-wing politics of envy.

Demostrated just last night on QT - Tarzan used the term "abrogate the ECHR", so McNumpty in a fit of pique, was sarcastic about him using a "posh" term...

...really impressive political debater, not.



And, as tom says, missing the point that while Osborne was on the yacht for drinks, Mandy was there for a couple of days doing his "come fly me" act, actually staying on the yacht - no conflict of interest, no inappropriate action, much.

And Mandy has been trotted out more and more, to try and counter the Darling stutter..."now, now, now, but, but, but, not our fault, now, now, now, but, but, but". Painful watching.

Because Mandy is sooo much more trustworthy?

Rochdale_Pioneers

tomstickland wrote: »

Is that yacht the one with Mandelson on it too?

It is - Mandleson never had any credibility so he had none to lose.

Wookster wrote:

You can rant and rave but the simple fact is borrowing cannot go on indefinitely at the rate it has increased to for too much longer. It is simply unsustainable. People will start to lend to other places perceived to be more prudently managed and less likely to default.

Rant and rave?

1. "Borrowing cannot go on indefinitely". The banks have had a pretty good go at it - somewhere or other they managed to find people to loan them multiples of their country's GDP. Not remotely wise, but it demonstrates that borrowing on a far greater scale than that of the UK government is possibl;e. You don't mean the banks? America seems to be making a pretty good go of it with government borrowing already triple ours as a % of GDP and increasing. Ah, you don't mean America? How about all those European nations - Germany and France for example - who managed to borrow 50% more as % of GDP than we have for sustained periods. You don't mean France and Germany? OK then how about small economies like Greece who have state borrowing more than double ours sustained for decades despite all of the political and social wobbles in that country? Not greece?

So when you say "Borrowing cannot go on indefinitely" its a special rule just for the UK thats not based on any evidence or indeed rationale whatsoever. We've never ever had as much debt as we've had now you say, and it can't be sustained. But didn't we have borrowings of 300% of GDP post WWII?

2. "People will start to lend to other places perceived to be more prudently managed and less likely to default". Well we've still maintained our AAA rating unlike certain European neighbours I could mention, nor according to any of the analysts are we in any danger of losing it - unlike certain European neighbours I could mention. So, as your statement is not factm, is it a perception or your secret desire?

We keep having these conversations - you and all the other doom-obsessives. "The UK is in more debt than everyone" you say. Then its revealed that we're not - even the EU says others have far more debt than we do and they're so pro-Brown that they're blocking his bailout plans. "We can't borrow any more - investors will go elsewhere" you say, then we manage to sell our gilts, the Germans manage to sell only part of their and Spain scraps its sale completely due to an utter lack of demand. "We're performing worse than everyone else" you say. Then output figures show that the UK economy is contracting slower than the EU average, slower than Germany, than Japan, than the US. "Our banking regulation failure has left us uniquely screwed" you say. Then a succession of countries - Iceland, then Ireland, now Austria - face a complete collapse in their debt-ridden banks that the state cannot possibly manage.

So when you say "You can rant and rave but the simple fact is..." you will understand when with respect I take your "facts" under advisement.

nickmason

LauraW10 wrote: »

Agree with the first bit about our debts not being that bad relative to other countries. However, I'm sure Ken Clarke said on the BBC news at ten last night that the government should cut spending NOW - not wait until next year. I remember 'cos this made me laugh. Who else is cutting public expenditure right now? No country. The Tories really are determined to do a hatchet job on us again and take us back to the '80s. Frankly, they can't wait.

Edit - The Tory party seem to be using Ken alot now instead of George O - what's all that about?

Laura,

The Tories are determined to do what's right for the country. Just as Labour want to. How daft does it sound to say "Labour really are determined to take us back to the '70s?".

The difference in opinion is how to do it. Emotions are not the language of economics.

chris_spackman

Wookster wrote: »

Let me guess, his trade mark phrase being "fiscal prudence" and the "golden rule".

Suddenly something stinks here...

And 'global'. He likes that word too.

Wookster

Rochdale_Pioneers wrote: »

1. "Borrowing cannot go on indefinitely". The banks have had a pretty good go at it - somewhere or other they managed to find people to loan them multiples of their country's GDP.

Yes - they did and look at the mess that's got us into. If anything this government should learn that debt is not to be used lightly or recklessly.

Rochdale_Pioneers wrote: »

2. "People will start to lend to other places perceived to be more prudently managed and less likely to default". Well we've still maintained our AAA rating unlike certain European neighbours I could mention, nor according to any of the analysts are we in any danger of losing it - unlike certain European neighbours I could mention. So, as your statement is not factm, is it a perception or your secret desire?

As you point out, all government are increasing expenditure. The supply of financing is not unlimited, therefore there will be competition for resources. Those viewed as prudent will pay less for the privelidge and those viewed as outright recklesss or unable to manage their finances (Greece, Spain, Italy) pay more (Spain pays on average ~2.5% higher than Germany). Surely you must be aware that the more you borrow, the higher the borrowing cost and the higher the cost of servicing that debt. Thats all money that can't be used for other things - like our crumbling rail network, the burgeoning welfare burden.

Where have I said that the UK is uniquely screwed? My point has always been that when things pick up countries like Japan & Germany will see an upswing much quicker than we do because private sector debt is nothing close to the levels in the UK so they will be able to go out and consume, where as the UK will still be paying off debts. (Also that we have had less of a housing market boom than either of those two countries in the last 10 years).

Again I have to point out that this last para. refers to personal debt not public debt as you seem to be incapable of seeing the difference between the two.

chewmylegoff

Rochdale_Pioneers wrote: »

We'll continue to borrow. We're up to 47% on UK measure - so thats about 51% on my preferred Eurostat measure that includes PFI and net banking liabilities. Thats still not a lot vs France Germany Japan America etc etc.

it's not just what the govt has raised in sterling denominated debt that affects the market's appetite to take up further sterling denominated debt.

once you factor in corporate and personal debt, we become severely indebted compared to the countries you have mentioned. in my view the government is going to have to start paying a very high coupon compared to what it is offering now, if it wants to keep filling the void with debt.

nickmason

Rochdale_Pioneers wrote: »

1. "Borrowing cannot go on indefinitely". The banks have had a pretty good go at it - somewhere or other they managed to find people to loan them multiples of their country's GDP. Not remotely wise, but it demonstrates that borrowing on a far greater scale than that of the UK government is possibl;e. You don't mean the banks? America seems to be making a pretty good go of it with government borrowing already triple ours as a % of GDP and increasing. Ah, you don't mean America? How about all those European nations - Germany and France for example - who managed to borrow 50% more as % of GDP than we have for sustained periods. You don't mean France and Germany? OK then how about small economies like Greece who have state borrowing more than double ours sustained for decades despite all of the political and social wobbles in that country? Not greece?

Nice rhetorical flourishes. But are you really saying it's okay to keep on borrowing - putting the whole world on the "never never"? Does that stand up to any economic or logical rigour? Is this the emperor's new clothes? Somehow the argument that "short-term borrowing is good" has become "we can keep on borrowing forever". (Note that I'm not making relative comparisons against other countries, or assessments as to which have or have not yet hit the "event horizon" of economic implosion, simply investigating this "borrowing is fine" argument).

In the spirit of rhetorical flourishes, I've always been quite partial to the native indian proverb "We don't inherit the planet from our parents, we borrow it from our children". Maybe some people have taken that a bit too literally...