Consumer morale near 2-year low in November

tomterm8

Really2 wrote: »

How does Europe look compared to then?
I take it we are out of the woods then as this is now the government and nothing to do with the on going financial crisis?;)
Why people go about ConDem cut's is beyond me, they are enforced cuts by our deficit.
Trying to blame the current government for them ignores the deficit we racked up pre-bust and the cuts that were going to come if Labour where in power.
Are people really suggesting things would be so much different and better if Labour where in power?

Whatever Labour would have done while in power is pretty irrelevant, as they are not in power.

I think we have got to the point that we are really at the edge of a depression, economically speaking. People seem to think things have improved in the last 2 years. And, in some ways they have, but I think the policies that achieved that just bought time.

I am worried that time is running out.

And yes, we can go round and round the mulberry bush, I just don't think the deficit is as serious an issue as a banking system that is half bankrupt, and a systemic european debt crises that is about to explode.

People who are worried about the deficit are worried about a symptom, I think the actual disease is very serious indeed.

DervProf

My guess is that if the credit was flowing freely again, consumer morale would be back to "normal" (spending like there's no tomorrow, which there nearly wasn't).

Really2

tomterm8 wrote: »

I just don't think the deficit is as serious an issue as a banking system that is half bankrupt, and a systemic european debt crises that is about to explode.

People who are worried about the deficit are worried about a symptom, I think the actual disease is very serious indeed.

Does the countries debt not have an impact on the banking system?
I think Gen said UK banks ratings cant be higher than the countries rating so if we get downgraded it harms our banking system and forces our borrowing rates up.
If our borrowing rates go up, the deficit grows further.

Not tackling the deficit is just putting the bills under the door mat if you ask me.
things could be a whole lot worse if your debt gets out of control, look at Europe.

tomterm8

Really2 wrote: »

Does the countries debt not have an impact on the banking system?
I think Gen said UK banks ratings cant be higher than the countries rating so if we get downgraded it harms our banking system and forces our borrowing rates up.
If our borrowing rates go up, the deficit grows further.

Not tackling the deficit is just putting the bills under the door mat if you ask me.
things could be a whole lot worse if your debt gets out of control, look at Europe.

I am looking at Europe... Ireland, for example which took these measures... and has just been downgraded five notches, although they started with a better deficit than us, and a better banking system.

Or Latvia, which is a basket case, who after massive cuts to the public budget, has a higher deficit than they started.

Bottom line: lots of the countries that have tried to tackle their deficits have ended up with higher deficits and worse interest rates, and more fragile banks, than they had before they took these measures.

Tacking the deficit is a conventional policy that seems to have damaged every country it has been tried in, very substantially.

It comes down to economics: this policy can not work without a severe recession if the private sector is deleveraging unless we can get an export surplus. And if we have a severe recession, our ability to repay existing debt will be impared, and so it will become more expensive to finance debt, which will require steeper cuts, and... that's what happened to Ireland. And Argentina. And Latvia. And a lot of other countries.

Really2

tomterm8 wrote: »

I.

Bottom line: lots of the countries that have tried to tackle their deficits have ended up with higher deficits and worse interest rates, and more fragile banks, than they had before they took these measures.

Tacking the deficit is a conventional policy that seems to have damaged every country it has been tried in, very substantially.

That is fairly obvious but they were forced to tackle debt as borrowing rates went up.
They could not borrow like before or carry on spending.

Nearly all european countries are cutting Germany for one so I am not sure how the idea goes that any of the countries could carry on spending regardless.

Could you explain how any of the countries such as the PIIGS could just carry on spending without cutting.

The point is we/they are still spending, our hand is forced by the markets. It is not a cynical worldwide ploy thought out by the ConLib alliance.

As for a recession, we may head back in but Ireland is way different to the UK, if it had it's own currency it would have halfed it's value two years ago.

Ireland had low rates (from Europe) and a white hot economy rates should have been a lot higher, it had a massive amount of property speculation (making the UK look tiny) building estates for people to live in without the people, all on the back of cheap money.
So they were helped by the euro in the boom now the euro is making life very hard for them, what other options did they have? default?

tomterm8

Really2 wrote: »

That is fairly obvious but they were forced to tackle debt as borrowing rates went up.
They could not borrow like before or carry on spending.

The problem with such a narrative is that, in fact, prior to Ireland, Latvia and etc making the public spending cuts, the cost of financing was significantly lower than after the spending cuts.

They were required to make spending cuts by European law.

The countries that didn't make spending cuts... Japan, America, the UK, and Iceland all have lower costs of funding than the countries that did make spending cuts, and in general substantially below historical averages for their nations.

As for how to tackle the deficit, I've said how I would do it. I would simply hold real public spending growth to a percent or a percent and a half below GDP trend.

That is not flashy cuts, but it is the same policy that cut debt to gdp ratio after world war II by a huge amount... in proportinate terms by three times the current UK public debt... in less than thirty years.

By my calculation, if we were to follow this policy, which requires little or no pain, we would repay the entire public debt in 15 years.

Really2

tomterm8 wrote: »

The problem with such a narrative is that, in fact, prior to Ireland, Latvia and etc making the public spending cuts, the cost of financing was significantly lower than after the spending cuts.

But that is what I am trying to say, the snowball had already started to gather momentum.
There is no way of knowing now (as the action has been taken) how much it's cost of borrowing would be had they done nothing.
I can't see it being cheaper, making wholesale cut's is not an easy decision no matter what anyone says on here.
You only do it as a last resort.

tomterm8 wrote: »

That is not flashy cuts, but it is the same policy that cut debt to gdp ratio after world war II by a huge amount... in proportinate terms by three times the current UK public debt... in less than thirty years.

It may have but we had cheap american money and an industrial boom, their is no chance on earth we can have that unless we find Gas and Oil again off the coast of the UK and Asia stop building things.

Sir_Humphrey

tomterm8 wrote: »

The problem with such a narrative is that, in fact, prior to Ireland, Latvia and etc making the public spending cuts, the cost of financing was significantly lower than after the spending cuts.

Explaining how economies really work to the frothers is like trying to explain to Pol Pot why irrigation canals cannot run uphill.

A waste of breath.

Really2

Sir_Humphrey wrote: »

Explaining how economies really work to the frothers is like trying to explain to Pol Pot why irrigation canals cannot run uphill.

A waste of breath.

Sorry, why am I a frother? because I think most countries have been forced to cut because of their debt. (at the mercy of ratings agencies)

Your problem is you are more than aware you could be out of a Job soon. A job you cant justify, remember your fireworks post.

Now anyone could easily point out you could use an Archimedes screw to get water up hill. (so up hill irrigation has been around for hundreds of years)
What a poorly worked out put down.
But thanks for the likeness to Pol Pot more than relevant?

tomterm8

But you can compare it to other countries in the same situation which did not make the same cuts. For example, before Ireland did its cuts, its funding cost was slightly lower than ours at the time, and its deficit was a quite a lot lower. After making spending cuts, its deficit has increased substantially above ours, and its funding costs have risen so much it has been downgraded by six notches.

Before the spending cuts, Ireland was in a better situation to us.

During the same period, our financing cost has stayed within historical norms, and our deficit started to shrink, before any spending cuts took place.

I mean, that is as good as it gets in economics: comparing surveys of different countries.

In the UK we have a long history of fiscal consolidations to draw from. You can draw a correlation between what has worked in a historical perspective, and what we are trying to do, and our most successful consolidations were done in a different way, more gradually.