Do you think we could have avoided recession if the Tories were in power?

a_rather_tall_man

JayScottGreenspan wrote: »

Seconded. He would certainly have regulated the banks more, and nipped a lot of it in the bud.

Seems like an intelligent bloke, and more interested in what's best for the country than what's best for him. A very rare thing, that.

I remember reading this http://business.timesonline.co.uk/tol/business/columnists/article5908405.ece in the paper recently. Look at the bit about what people said in the past at the bottom of the article. Did Vince Cable really say that? If he did then I would question your statement about him nipping it in the bud and regulation.

Wookster

Rochdale_Pioneers wrote: »

An interesting thread. He's a scenario for you - the Tories had been in power for most of the last decade.

1. They deregulated the city even further than Brown did, actioning all those speeches they made and making all their banking friends happy (the ones who fund the party).
2. They spent less than Brown did. A point to make is that Clarke had no intention of sticking to his own post-97 spending plans, so the massive pay-down of debt pre-2003 may not have happened on the same scale in a Tory government scenario. This is then balanced off by less public spending.
3. Unemployment is higher (lower public spending), interest rates are politically manipulated, inflation is higher.

So, we enter the recession with an even bigger liability due to the banks being allowed to go even further than they have in the real world. We have lower debt - but not much lower due to higher benefits costs, lower tax takes via tax cuts.

We then see the Tories uniquely not throwing cash on the fire and the UK crashes faster than anyone else.

In what way would that have us better off?

Life on Planet Rochdale must be good eh?

And I suppose there is someone writing out blank cheques to pay for Crash's mega budget deficits as well.

I'm begining to think you are a Labour plant Rochdale. You have no capacity to criticise Labour at all and you cannot recognise their faults at all. :rolleyes:

Generali

A._Badger wrote: »

"]Excuse me? What's factual about

1. The UK doesn't produce much stuff that other people want (hence the enormous trade deficit) So how come we have the 5th biggest economy in the world or is Wookster just ignorant about what the UK produce?"


I'm afraid he's quite right. The UK was (is) heavily reliant on the service sector - banking for example. We have been running a massive trade deficit for years and its going to get worse. Wookster isn't being ignorant. He's just sticking to the facts.

"2. The pound is perceived to be one of the more risky currencies. Compared to what? - the Zimababwean dollar, the rouble, the zloty, the krona?"

The ones that matter - like the US Dollar and the Euro. Hence the drop in value against them.

"It's one thing to identify problems, quite another to run dowm Britain just for the sake of it:rolleyes:"

And it's yet another to believe what you wish to believe, despite the evidence.

Until world trade started to drop towards the end of last year, the UK exported more than she ever had done at any point in her history in absolute terms according to the ONS. It's just that more is imported than exported.

A._Badger

Generali wrote: »

Until world trade started to drop towards the end of last year, the UK exported more than she ever had done at any point in her history in absolute terms according to the ONS. It's just that more is imported than exported.

Yes, but what proportion of those exports were products, as opposed to services? Perhaps even more to the point, how sustainable, in the light of recent events, were the sectors from which they came?

The British economy has been living on borrowed time for a long while. Sooner or later we will have to reckon with the cost.

Generali

A._Badger wrote: »

Yes, but what proportion of those exports were products, as opposed to services? Perhaps even more to the point, how sustainable, in the light of recent events, were the sectors from which they came?

The British economy has been living on borrowed time for a long while. Sooner or later we will have to reckon with the cost.

Very true and I don't make the point to undermine the central part of (what I believe is) your argument - that the UK economy is going down the gurgler and that big and painful structural changes will be needed.

A._Badger

Generali wrote: »

Very true and I don't make the point to undermine the central part of (what I believe is) your argument - that the UK economy is going down the gurgler and that big and painful structural changes will be needed.

I wish I didn't agree. Sadly, I do.

Wookster

Generali wrote: »

Until world trade started to drop towards the end of last year, the UK exported more than she ever had done at any point in her history in absolute terms according to the ONS. It's just that more is imported than exported.

For me, this is perhaps the most scary thing about this economic crisis: the trade imbalances. They have to unwind at some point and that is going to be enormously painful, possibly apocalyptic.

What's even more worrying is that there doesn't seem to be any natural market force driving towards equilibrium as part of a natural cycle i.e. the imbalances need to unwind but I suspect it is only an economic crisis such as this that will make them unwind.

What are your thoughts Generali?

Generali

Wookster wrote: »

For me, this is perhaps the most scary thing about this economic crisis: the trade imbalances. They have to unwind at some point and that is going to be enormously painful, possibly apocalyptic.

What's even more worrying is that there doesn't seem to be any natural market force driving towards equilibrium as part of a natural cycle i.e. the imbalances need to unwind but I suspect it is only an economic crisis such as this that will make them unwind.

What are your thoughts Generali?

Normally, exchange rate movements will act to reduce trade imbalances - net importers need to generate foreign currency to buy those imports and the act of selling local currency to buy the currency of the exporter will push down the importer's exchange rate making exports more expensive and reducing demand.

Until recently, we've had the following very large net exporters:

- China
- Japan
- Germany
- Oil exporters

Their exchange rates haven't adjusted and thus reduced trade imbalances for different reasons in each case (I can list them if you're interested).

The trade surpluses of the oil exporters is being reduced as the price of oil falls. Those of Germany, Japan and China are falling as the buying power of their customers falls.

Of those three, Japan is pretty much screwed (I'd use a stronger word by choice) by demographics. They have a rapidly aging population, little immigration and less appetite for immigrants. They won't be able to raise home consumption and export markets are done for. They owe an entire year's worth of output on their national debt.

Germany should be ok in the end as they have amazing engineering capabilities - they don't see making things as being something that horrid people do like the Brits seem to. They produce a vast proportion of the machines that are used to make stuff so wherever things are going to be made next, the Germans will sell to them.

China? That's an interesting one. Who knows? Demographics will get them in the end due to the one child policy but that's a long way off (20 years or so???). What happens in the meantime? Well they've got this huge savings account in effect with a couple of trillion bucks in it that they can spend. The trouble is, by spending it, they reduce the value of what remains as they'll force down the price of their assets by the act of selling.

There will be 2 competing forces in the FX market - US people repatriating savings (it's what they do in bad times, historically at least) and the Chinese Government sell USD denominated assets. It's impossible to say what the outcome will be. Anyone that claims to know the outcome is a snake oil seller.

Wookster

Generali wrote: »

Their exchange rates haven't adjusted and thus reduced trade imbalances for different reasons in each case (I can list them if you're interested).

This is the key really isn't it.

China has had an artificially low exchange rate for many years now - that has made its exports dirt cheap by western standards. How events turn out in China will be interesting to say the least: 1.3B angry people doesn't bode very well at all...

Capitalism and free trade is all very good, but not when there are such major manipulations going on.

My money is on the US$ going through the floor when China starts to sell US$ for their own stimulus/ rescue/ development packages.

JayScottGreenspan

a_rather_tall_man wrote: »

I remember reading this http://business.timesonline.co.uk/tol/business/columnists/article5908405.ece in the paper recently. Look at the bit about what people said in the past at the bottom of the article. Did Vince Cable really say that? If he did then I would question your statement about him nipping it in the bud and regulation.

David Smith is a pretty odious journalist, so I suspect he may have taken some comments out of context.

Of course, it is possible that Vince Cable said something I disagree with, but without seeing what he said I'd prefer to defer judgement. When I've actually seen him (rather then getting it second hand from a journo) speaking in Parliament or on Newsnight he's talked a lot of sense.

Compare that to Lord tuner on Newsnight yesterday (for anyone who caught it). Not that I disagree with everything he said, but he was so weasily, obtuse and "on message" that Brown may as well have been standing over him with a flail.