Consumer morale near 2-year low in November

Really2

Sir_Humphrey wrote: »

Not really, IIRC it led to a famine.

I was thinking more on the torture and execution side of things. I think execution made up nearly half of all deaths.

Really2

tomterm8 wrote: »

A little bit cheaper, certainly, but surely if the market wanted immediate cuts, the market would be telling us that? And, now that the real cuts are actually starting to take place (very marginally), the cost of funding seems to be going up.

Could that not indicate they want faster cuts seeing it was going up before without cuts?

tomterm8

Really2 wrote: »

Could that not indicate they want faster cuts seeing it was going up before without cuts?

Well, I don't see any of the moves in the market that suggests that it thinks immediate funding cuts are necessary... the rises in funding during the election were associated with lots of banks collapsing in europe at the same time.

Prior to the banks collapsing, the general trend in gilts yields were downwards, in fact, to the extent that it was very unhealthy.

You could put down the decrease in yield costs after the election to the various European bailout funds that were established to prevent a wide scale banking crises starting.

In other words, the markets don't seem to have been moving much at all due to UK government debt, and don't seem to be discounting in the price any possibility they won't get repaid either before or after the cuts were announced.

If the cuts work as advertised, yields should go down in the next six months.

Until that happens, it is hard to really comment.

All I hope is that frankly I am wrong... I've been wrong in the past, and will be in the future... I would like a nice decade of prosperity, but am actually quite doubtful that any policy any government party in the UK can have will be able to achieve that. It seems to me, whatever party got in, a lot of our problems are outside our control, in Europe.

Thrugelmir

StevieJ wrote: »

I am not sure what is new about the ConDem cuts, maybe some people are just slow on the uptake.

Or the previous Government duped the electorate by doing nothing giving the impression that everything was ok, once the banks had been "rescued". Incentivising people to buy new imported cars rather than save or pay down debt.

Seems even Mr Darling is now admitting that the Labour party lost credibility due to its lack of any strategic plan.

Really2

Perhaps I just look at it a bit to much like a business.

If a company is borrowing money MOM to pay its wage bill it will not be long before the bank says cut your wage bill or it's curtains.

tomterm8

Really2 wrote: »

Perhaps I just look at it a bit to much like a business.

If a company is borrowing money MOM to pay its wage bill it will not be long before the bank says cut your wage bill or it's curtains.

Sorry, I had to go out and remove snow.

I understand your point. That is classical economics for you...

But, if you assume that what works in the small will work in the large, you are in for one massive surprise.

Governments are not businesses.

If you take the very largest business... a Microsoft or big bank... and look at what happens if you cut say 20% of its spending in a quarter... you will find a marginal impact on unemployment for a quarter, and you won’t see any impact on GDP .
Our government accounts for something in the order of 40% of the money spent over the whole economy; if it cuts its spending by 1% in in a quarter, it will have a measurable impact on GDP. This impact actually figures into tax revenue.

If you cut government spending too rapidly, it is certain that austerity will cause a recession.

The depth of this recession matters, because if it is too deep, you get into an Ireland situation, where you end up worse off than when you started - remember, recessions cause tax revenue to fall and spending to rise.

StevieJ

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.

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.

Slowly, slowly catchy monkey

Really2

tomterm8 wrote: »

But, if you assume that what works in the small will work in the large, you are in for one massive surprise.

Governments are not businesses.

If you take the very largest business... a Microsoft or big bank... and look at what happens if you cut say 20% of its spending in a quarter... you will find a marginal impact on unemployment for a quarter, and you won’t see any impact on GDP .
Our government accounts for something in the order of 40% of the money spent over the whole economy; if it cuts its spending by 1% in in a quarter, it will have a measurable impact on GDP. This impact actually figures into tax revenue, so the 1% cut will have less than a 1% cut on the deficit.

I understand that, but the blindingly obvious point there is because the public sector is so overblown (40% of GDP) it needs to be cut 40% is not sustainable.

I am sorry, but I think you are in for a shock if you think public spending is not like a business.
At some point the books have to balance if they don't you are bust.

Am I the only person here who thinks 40% of our economy is way over the top and way out of balance.

That means for every £10 spent in the whole of our economy £4 is spent by the public sector, so when everything outside the public sector spends £6 it needs to bring in £4 revenue.:eek:

StevieJ

Thrugelmir wrote: »

Or the previous Government duped the electorate by doing nothing giving the impression that everything was ok, once the banks had been "rescued". Incentivising people to buy new imported cars rather than save or pay down debt.

Seems even Mr Darling is now admitting that the Labour party lost credibility due to its lack of any strategic plan.

Who I find bizzare are the people who believe that the Tories (free marketeers) would have done any different to Labour, especially with regard to control over the banks, we all remember that report produced in 2007 calling for a reduction in govt control over bank lending (that soon went under the carpet ).

What was it that the report said, oh yes I remember

"no need to continue" to regulate mortgage provision, saying it is the lender, not the client, who takes the risk.

Sir_Humphrey

Really2 wrote: »

I am sorry, but I think you are in for a shock if you think public spending is not like a business.
At some point the books have to balance if they don't you are bust.

Sorry, but running government finances is not like running a business. How many businesses still have to pay people a wage after sacking them for instance? How many companies (legally!) pay themselves what they are charged for VAT? (Two instances of many I could mention).

One thing that is similar is the effect of reducing spending on businesses that rely on that spending.

Remember that spending is a big merry-go-round. Money spent by government then gets respent by the person who received it. Some of it ends up back in government via tax.