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

Any

sandiep wrote: »

Businesses going bust at present at going bust primarily because they've reached the point where the bank will no longer support or renew facilities. The main reason woolies went bust when it did was because they couldn't renew long term debt facilities with the bank. If the debt renewal wasn't due for a year later, then maybe they'd have hung in there for a few months longer.

Woolies went bust FINALLY, because they were loosing money for years and would they not be withdrawn the debt facilities they would have been written off only with bigger amount of suppliers that are never going to get paid...

Saying that, I agree that there are good businesses out there that only needs to get through bad times and won't get through it without the facility of overdraft or loan..

Radiantsoul

bendix wrote: »

Right . . so the logic is that the VAT reduction worked because without it the current situation might be more worse than it actually is, yet . . umm .. we'll never know.

As a philosophical premise, that takes some sorting through. Where is the burden of proof?

The known factor is that about £10bn has been transferred from government to the private sector. Essentially households and consumers are similiar groups.

The wider issue is whether that £10bn has been saved or spent.

Pennywise

It depends on which Tory leader was PM.

If it were Cameron, then probably just as bad, or maybe even worse, as he is just as vacuous as Tony Blair was.

I think IDS could have made a brilliant PM and may well have put Britain in a better shape to weather the storm, i.e. lower debt, more efficiency, less bloated public sector, and maybe even a reduced welfare state dependancy? I always thought IDS had some back-bone and gravitas.

As for William Hague, I really havn't a clue - I was never sure where he stood - I don't think he does either?

baileysbattlebus

Just a quick thought - during the last general election the Tories wanted to do away with stamp duty on property under £250k - it would help first time buyers, they said.

All it would have done was push up house prices at the bottom end of the market - HPI would have been even worse than it has been.

baileysbattlebus

Also from 2005 - Tory manifesto

The best guarantee of future prosperity is a dynamic economy. The growth of China, India and other Asian economies poses a direct challenge to our future competitiveness. New technology and the speed of global capital flows punish the inflexible and the sluggish. We need to reward risk-taking and innovation so that Britain becomes the best place in the world to start and to grow a business

By one D Cameron -

JayScottGreenspan

LauraW10 wrote: »

No he wouldn't. As Merv said yesterday "whilst the music was playing, everybody had to dance"

No, everybody didn't have to dance, and not everybody did. Those without the guts to point out that the emperor was naked were the problem. That'll be the politicians who put their image and short term popularity before the best interests of the country, then.

Not Vince. This is what he was saying back in 2003. He kept drawing attention to this issue until Northern rock went boom. Only then did everyone else start to (very slowly) see things for what they were...

Action will have to be taken on the availability and terms of mortgage credit. This idea has been criticised, even ridiculed, in the past as bringing back the pre-Thatcher era of credit controls. In practice, policy options are available which are compatible with the world of competitive, globalised markets.

First, the British authorities are required, in any event, to monitor the capital adequacy - the cash reserves - of the banking system under international (Basel) agreements.

These obligations could be turned into an active instrument of policy by quarantining cash held by mortgage lenders in periods of market overheating and relaxing requirements in periods of serious market turndown.

Samuel Brittain has endorsed this approach: requiring mortgage lenders to place variable special deposits with the Bank of England. A similar approach to intervention is already taken in respect of equity markets where the regulator (the FSA) has applied flexibility to the "resilience test" (of reserves) in the insurance sector in order to prevent unnecessary technical selling.

Second, the Financial Service Authority already has a role regulating individual mortgage lenders.

Its remit should include systematically reining back the more reckless institutions (Northern Rock is an example) which are operating on dangerously high loan to asset ratios. Revised Basel requirements will in fact, set levels of prudent credit for industrial lenders, and these requirements could be anticipated.

There would need to be an analytical basis for making decisions on when to intervene; the Monetary Policy Committee or a separate asset valuation committee in the Bank of England (as recommended by John Calverly of Amex) would study trends in asset prices and seek to judge reasonable ranges beyond which warnings, and then intervention, would be called for.

I do not pretend that this is necessarily a technically easy task. There are different theories of what drives house prices. But this is true also of inflation more generally. The fact that the Bank has been extremely bashful in pronouncing on the housing market is not helpful; its future credibility rests on taking a clear view and, if necessary, the Chancellor should tell the MPC that that is part of what it is paid for.

While an active approach to managing asset bubbles presents formidable technical challenges to the Bank of England and the FSA, the real challenge is to the government. It is still mesmerised by the Thatcherite orthodoxies of the last two decades. If it wants to salvage its reputation for economic competence it will now have to venture beyond them.

Matty0682

I think we would be in the same situation whatever party was in power. THis is my list of stakeholders involved

Dot.Com Crash: At the back of the Dot.com crash (after a period of rising rates in the US) $5 trillion was wiped off the Market value of technology companies. Coupled with Sept 11th 2001: Stock Market drives

Fed/BoE: Slash rates to encourage lending by banks and spending by consumer to inflate the economy

Sales Culture: Mortgage Brokers are incentivised to lend people money to earn commissions. Lack of Due Diligence on mortgage applications by these people and fabricated mortgage applications lead to people earning beyond their means many of whom could only barely afford their mortgage payments when interest rates were low.

Result: Housing boom as approved mortgages are not linked to actual earnings. Banks start offering 100% mortgages as loans are secured against houses in a rising market

Credit Derivatives Market: All these mortgages are packaged up and then sold on as securitised products

Credit Agencies: Credit Agencies rate these packaged mortgages as Investment Grade (low risk), where in reality they were full of mortgage where people have borrowed beyond their means

Defaults: People started to default on their mortgages. However these packages were sold to financial institutions such as banks, insurers and hedge funds thinking they are low risk. All these lost money

I am not show how much Brown can be blamed for all this. True he encouraged borrowing and spending. What perhaps he should have done, was to cut spending and increase taxes in times of prosperity.

I blame
1) the "I want it now attitude" where people have borrowed beyond their income. This has been our culture
2) the sales culture amongst mortgage brokers to sell a new mortgage no matter the cost
3) US/UK Government & BoE for encouraging borrowing of magnanimous proportions
4) Rating agencies for not knowing what made up these packaged securities
5) Short termism culture in Investment Banks where traders are rewarded for short-term profits
6) FSA - what regulation (i know this was set-up by the Gov)
7) Financial institutions such as banks, insurers and hedge funds who did not carry out Due Diligence on the toxic stuff they were actually buying
8) Mortgage Suppliers: why introduce 100% or even 110% mortgages when house prices can go down

Aren't we all to blame?

ninky_2

Isn't it depressing that in a so-called democracy we're discussing our options between Labour or Conservative?

It's a bit like having to choose between Pepsi and Coke.

Personally I'd rather have the tap water.

ninky_2

I do have one question. Why is the pound falling against other currencies in a global recession?

Wookster

ninky wrote: »

I do have one question. Why is the pound falling against other currencies in a global recession?

For two reasons:

1. The UK doesn't produce much stuff that other people want (hence the enormous trade deficit)
2. The pound is perceived to be one of the more risky currencies