German 1Q GDP Posts Sharpest Fall Since 1970

Degenerate

StevieJ wrote: »

Just one point regarding exports to Europe, do you not think that the slide in Sterling against the Euro will not dramatically assist our exports.

Not to mention that it also makes our products more competitive on the home market, encouraging import substitution.

Mr_Mumble

Degenerate wrote: »

The point is not that the UK recession and unemployment don't matter, it is that despite the criticisms that people (including you) make of the UK government, the evidence suggests they have been managing things well to mitigate the impact of the crisis.

Comparing a manufacturing-centric economy such as Germany or Japan to that of a service-centric UK is comparing apples to oranges.The UK government is keeping GDP artificially high by spending on the never-never, the 2008 deficit was worse than any other EU country with the exception of Ireland, the deficit for 2009 is twice as high again.

Rochdale_Pioneers

Mr_Mumble wrote: »

Comparing a manufacturing-centric economy such as Germany or Japan to that of a service-centric UK is comparing apples to oranges.The UK government is keeping GDP artificially high by spending on the never-never, the 2008 deficit was worse than any other EU country with the exception of Ireland, the deficit for 2009 is twice as high again.

Which means what exactly? We started this with substantially less debt than our bigger competitors - we can run a bigger deficit for a while in order to leave recession quicker and STILL have less debt. The budget deficit is caused by tax receipts falling off, not spending. In the last recession borrowing increased 200 basis points (c35% of GDP to c55%) despite spending on everything other than dole being cut - tax revenues collapsed. Same thing here on a larger scale. You want to end the overspend, you need to pull in more tax. Can't do that in recession.

zappahey

StevieJ wrote: »

When the dams break there could be some serious value in European properties.

<perk!>

:T

Degenerate

Rochdale_Pioneers wrote: »

Which means what exactly? We started this with substantially less debt than our bigger competitors - we can run a bigger deficit for a while in order to leave recession quicker and STILL have less debt. The budget deficit is caused by tax receipts falling off, not spending. In the last recession borrowing increased 200 basis points (c35% of GDP to c55%) despite spending on everything other than dole being cut - tax revenues collapsed. Same thing here on a larger scale. You want to end the overspend, you need to pull in more tax. Can't do that in recession.

And of course, the sooner we are out of recession the sooner the fiscal situation can recover. So the choice is between:

a) Spend a lot now, recover sooner, start paying it back.
b) Increase taxes, slash spending, cripple the economy...
...and probably ending up with more deficit spending because tax receipts will remain down and benefit claims up for an extended period.

Which would you choose?

Generali

Degenerate wrote: »

a) Spend a lot now, recover sooner

Do you honestly believe that the Government can fix this with a wave of the magic debt laden wand? If it's that simple then surely we would never have had a recession let alone a depression since Keynes came up with his ideas in the 1930s and 40s.

The trouble is, each pound the Government borrows reduces the money available to the private sector to borrow on a pound for pound basis. Further, that means that businesses can't invest to employ people on a productive basis and actually get the UK moving again.

sdooley

Generali wrote: »

The trouble is, each pound the Government borrows reduces the money available to the private sector to borrow on a pound for pound basis. Further, that means that businesses can't invest to employ people on a productive basis and actually get the UK moving again.

I'm not sure there's a precisely fixed pool of money as this would indicate. Government borrowing can crowd out the private sector but this isn't on a pound for pound basis. And where much of the government borrowing is to lend on to the private sector (most notably with the banks) then the yield transformation exercise (govt borrowing cheaper than bank borrowing) may well increase credit capacity in the system (or at least reduce the level of de-leveraging across the economy).

Steady-state economics is a bit retro. And even now it's a bit rich to say state borrowing is the big problem in the UK compared to the massive stock of private sector debt.

Rochdale_Pioneers

Generali wrote: »

Do you honestly believe that the Government can fix this with a wave of the magic debt laden wand? If it's that simple then surely we would never have had a recession let alone a depression since Keynes came up with his ideas in the 1930s and 40s.

The trouble is, each pound the Government borrows reduces the money available to the private sector to borrow on a pound for pound basis. Further, that means that businesses can't invest to employ people on a productive basis and actually get the UK moving again.

Surely the Keynesian spend your way out of recession model means you have to be in one start with. You spend the additional cash then, not before.

Anyway, we have seen what happens if you do the opposite and slash spending. The early 80s recession demonstrated that far from giving business money to spend on employment, the spiral into the pit steepened pushing more people out of work.

Degenerate

Generali wrote: »

Do you honestly believe that the Government can fix this with a wave of the magic debt laden wand? If it's that simple then surely we would never have had a recession let alone a depression since Keynes came up with his ideas in the 1930s and 40s.

Economic levers don't act that quickly. As for Keynes, those that claim it's never worked ignore the fact that the US was finally lifted out of the great depression by a truly gargantuan wave of deficit spending brought about by WWII.

The trouble is, each pound the Government borrows reduces the money available to the private sector to borrow on a pound for pound basis.

And that's where QE comes in. The banks are now awash with cash, ask monkfish - they're just reluctant to lend it yet.

kennyboy66_2

Generali wrote: »

Do you honestly believe that the Government can fix this with a wave of the magic debt laden wand? If it's that simple then surely we would never have had a recession let alone a depression since Keynes came up with his ideas in the 1930s and 40s.

The trouble is, each pound the Government borrows reduces the money available to the private sector to borrow on a pound for pound basis. Further, that means that businesses can't invest to employ people on a productive basis and actually get the UK moving again.

I thought that Keynes was writing his theories in the context of just being through a global depression.

Cyclical recessions are inevitable and probably desirable to shake out the dross.
I'm not sure if a depression is that desirable.

I think had we let banks fail, a depression would have been close to a certainty.

If so, would you just let it run its course or try and spend your way out ?

Seems to me that once a depression sets in, that it is fiendishly difficult to get out of it.