George Osborne has no idea how to rescue the economy - Will Hutton

Rochdale_Pioneers

Isn't the problem here that none of the politicians have a vision for the future never mind how we get there. The Labour vs Tory bickering is rather pointless as neither side know what to do.

What Hutton and others are pointing out is that the model of capitalism used for the last few decades has failed. As a sales manager trying to squeeze every last penny of EBIT out of the £25m account I control for my manufacturing employer I am hardly anti-capitalism, but its painfully clear that we can't return to the status quo. Forget trickle down what we have had is stream up, with too much cash being sucked out of the majority to be locked away by the tiny minority.

For most of us it matters that economic confidence has crashed. Businesses like mine see consumer confidence in the gutter, listen to our customers stating its going to get even worse and question if those multi-million pound capex job creation projects are a good idea. Believe me I have plenty of opportunities to bring more business to my company, but returns are tight and its a difficult pitch to get the £ needed to increase our capacity .

For the people who have syphoned so much cash out of the economy it doesn't matter either way - they tie up the cash in long term investments and watch it accrue. Oik's obsession with debt misses the point about what this crisis is about. Its not debt thats the problem, its confidence. You can manage long term debt levels far in advance of our own if your investors have confidence in your ability to repay them. For those nations who control their fiat currencies the confidence should be 100% - the UK, US, Japan etc cannot run out of Pounds Dollars or Yen to repay their debts denominated in Pounds Dollars or Yen. Its a problem in the Eurozone but not for those of us who remain fiscally sovereign.

So yes, lets build a new airport and barrage and transport infrastructure. Massive bill, but massive return on investment that will be guaranteed by the UK government who cannot run out of UK currency. Spending to invest is what businesses do if they want to expand. Closing facilities to contract is what they do if they don't. UK PLC currently is shutting itself down. The question for both Labour AND the Tories is to ask why and how they think destroying residual confidence in our economy will drive growth and therefore ability to generate wealth. As the only winners from mass unemployment are the elite who can then pay people even less, you have to ask whose interest our politicians are working for.

Because it isn't ours.

ChiefGrasscutter

Good post above.
There is also a theory that our current troubles are mainly due to the price of oil/energy.
Indeed the same has been said of the middle east revolutions which seemed in part tied to the cost of food and hence into the price of oil - via the price of fertilizer - which is heavily oil based.

Without growth in our modern economy we cannot get out of debt: such is the way they work But the high oil price thoery goes on to point out that only by having a mega depression will the oil price drop significantly. Each time the economy starts grows - competition for oil increases - it rises in price and we run up against the ceiling again.

As to why this is happening now: We, we are in competition with places like China for oil who want to burn it at the rate the USA does...and that all the cheap and easy to find oil has been found and we are now increasingly having to rely on the difficult to find and recover oil - which is much more expensive.

ILW

ChiefGrasscutter wrote: »

Good post above.
There is also a theory that our current troubles are mainly due to the price of oil/energy.
Indeed the same has been said of the middle east revolutions which seemed in part tied to the cost of food and hence into the price of oil - via the price of fertilizer - which is heavily oil based.

Without growth in our modern economy we cannot get out of debt: such is the way they work But the high oil price thoery goes on to point out that only by having a mega depression will the oil price drop significantly. Each time the economy starts grows - competition for oil increases - it rises in price and we run up against the ceiling again.

As to why this is happening now: We, we are in competition with places like China for oil who want to burn it at the rate the USA does...and that all the cheap and easy to find oil has been found and we are now increasingly having to rely on the difficult to find and recover oil - which is much more expensive.

The UK has massive reserves of coal, exept it cannot be used due to "green" issues. Seems crazy to me.

macaque_2

ChiefGrasscutter wrote: »

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

Quote from US authour Upton Sinclair 1878-1968

Thats a good saying. In the case of our political leaders, they have turned self delusion into an art form. For example.

Unemployment
Anyone not working is not contributing and this reduces the efficiency and productivity of the economy. This applies equally to people on long term unemployment benefit as it does to bankers who retire at 35. Our real level of unemployement is over 10 million but, rather than publish the numbers in an honest way, the government have created a raft of sub categories (sickness benefit, pointess training schemes, economically inactive etc) to hide the ugly truth. The greater good would be served by publishing the real truth and then doing something about it. If too many capable people are retiring early through inheritence, then wealth tax is the solution. If people are getting £1m bonuses, they must be able to prove that they are genuinely productive and not just skimming from a priviledged position (for example, pension fund managers earn £millions but we have the worst performing pension funds in Europe). If we have millions of under 25's unemployed, immigration be stopped and the education system and companies forced to invest in better education/training.

GDP
The government have moved the focus away from balance of payments, balance of trade etc in favour GDP. This allows the government to flatter the statistics by taxing and borrowing. Gordon Brown was hailed for creating jobs and increasing GDP. He achieved this with higher taxes and borrowed money. Anyone with a shred of common sense knew that these jobs and GDP growth were not only unsustainable but actively undermining the economy.

At the moment, the government are looking at big infrastructure projects as the way through our problems. This is simply a sop to large vested interests. Infrastucture is nice but our problems are not infrastructure (and if you don't believe this, take a look at the chronically bad infra stucture of high growth economies like India and China). Growth comes from small and medium size companies. Right now the government are turning a blind eye to the banks (who are robbing this group and starving them of money) and large companies who are behaving in anti competetive ways. Red tape also chokes growth as does high house prices.

ruggedtoast

Rochdale_Pioneers wrote: »

Isn't the problem here that none of the politicians have a vision for the future never mind how we get there. The Labour vs Tory bickering is rather pointless as neither side know what to do.

What Hutton and others are pointing out is that the model of capitalism used for the last few decades has failed. As a sales manager trying to squeeze every last penny of EBIT out of the £25m account I control for my manufacturing employer I am hardly anti-capitalism, but its painfully clear that we can't return to the status quo. Forget trickle down what we have had is stream up, with too much cash being sucked out of the majority to be locked away by the tiny minority.

For most of us it matters that economic confidence has crashed. Businesses like mine see consumer confidence in the gutter, listen to our customers stating its going to get even worse and question if those multi-million pound capex job creation projects are a good idea. Believe me I have plenty of opportunities to bring more business to my company, but returns are tight and its a difficult pitch to get the £ needed to increase our capacity .

For the people who have syphoned so much cash out of the economy it doesn't matter either way - they tie up the cash in long term investments and watch it accrue. Oik's obsession with debt misses the point about what this crisis is about. Its not debt thats the problem, its confidence. You can manage long term debt levels far in advance of our own if your investors have confidence in your ability to repay them. For those nations who control their fiat currencies the confidence should be 100% - the UK, US, Japan etc cannot run out of Pounds Dollars or Yen to repay their debts denominated in Pounds Dollars or Yen. Its a problem in the Eurozone but not for those of us who remain fiscally sovereign.

So yes, lets build a new airport and barrage and transport infrastructure. Massive bill, but massive return on investment that will be guaranteed by the UK government who cannot run out of UK currency. Spending to invest is what businesses do if they want to expand. Closing facilities to contract is what they do if they don't. UK PLC currently is shutting itself down. The question for both Labour AND the Tories is to ask why and how they think destroying residual confidence in our economy will drive growth and therefore ability to generate wealth. As the only winners from mass unemployment are the elite who can then pay people even less, you have to ask whose interest our politicians are working for.

Because it isn't ours.

Good post right there.

kabayiri

Rochdale_Pioneers wrote: »

Isn't the problem here that none of the politicians have a vision for the future never mind how we get there. The Labour vs Tory bickering is rather pointless as neither side know what to do.
...

They probably know that the vision which the public would accept is unattainable.

Being politicians they have 2 choices -

a) tell us this unpallatable truth so we can work out something realistic
b) pretend that things will all come good, and milk the positive public sentiment while they can.

The odds on them doing a) are somewhere between zero and nil in my view.

ChiefGrasscutter

ILW wrote: »

The UK has massive reserves of coal, exept it cannot be used due to "green" issues. Seems crazy to me.

I always thought, and still do, that the closure of the coal mines was in part a strategic move for the very long term future when indeed the UK might have run out of the ability to either extract or import our required oil & gas. A policy of rather than waste it now keep it for the future.
Then all else fails as far as heating/electric generation is concerned we re-active the coal mines and tell all the greens/EU/UN whoever where to stick it.
Some of the remaining coal is a long way down and in thin seams so that in-situ coal gasification seems a more likely method of extracting its energy rather than traditional mining of it.............only time will tell.

Rochdale_Pioneers

Problem is that the cost of reopening the pits where the coal is would cost more than the market value of the coal.

Its a classic really. Privatise energy so that the free market can buy whatever kind of energy it wants from wherever it wants. Also tell coal it has to exist free of subsidy. So we find the profitable pit with an ocean of coal being closed by the market in preference of buying coal and shipping half way round the world and hundreds of miles to the power station because its "cheaper".

Of all the privatisations (and I have no problem at all with selling off the likes of Rolls Royce and BT), this one was the biggest crime. We sold our energy policy to Japanese investment banks and expected the market to do whats strategically in our best interests.

Wookster

Rochdale_Pioneers wrote: »

Oik's obsession with debt misses the point about what this crisis is about. Its not debt thats the problem, its confidence.

You are absolutely wrong. Debt is the problem. This crisis is about debt increasing without a similar increase in cash flow to service that debt. This has been utterly masked by asset price increases especially property. The property owning classes would never have tolerated this without the illusion of wealth from a seemingly never ending rise in property prices.

Rochdale_Pioneers wrote: »

You can manage long term debt levels far in advance of our own if your investors have confidence in your ability to repay them.

Spoken like a true debt junkie. This is where your argument fails.

ILW

Rochdale_Pioneers wrote: »

Problem is that the cost of reopening the pits where the coal is would cost more than the market value of the coal.

Its a classic really. Privatise energy so that the free market can buy whatever kind of energy it wants from wherever it wants. Also tell coal it has to exist free of subsidy. So we find the profitable pit with an ocean of coal being closed by the market in preference of buying coal and shipping half way round the world and hundreds of miles to the power station because its "cheaper".

Of all the privatisations (and I have no problem at all with selling off the likes of Rolls Royce and BT), this one was the biggest crime. We sold our energy policy to Japanese investment banks and expected the market to do whats strategically in our best interests.

There must come a point where oil prices make UK coal viable. I have heard that there is enough to run all our power stations for a hundred years or so.