BOE persistently wrong

Linton

Loughton_Monkey wrote: »

The dilemma is that this is impossible without much lower spending by households. Government gets its income very largely by skimming off "circulation" [i.e. spending, wages,.... the main components of GDP].

Hence, public spending should have gone down by a huge amount just to match it with income to stop the debt rising. And then on top of that, it should come down by a massive amount simply because income has taken a dive. Huge + Massive = Drastic cuts. What we are seeing, though, is piddling, insignificant spending cuts, just starting to come through 5 years into the recession.

I perceive it as coming home from work to tell your wife that not only have you reached your max credit card limit, but your salary is being cut by 10% from next week, and saying "that means the new car we bought last year will have to last 10 years instead of 5...."

The correct action, for this guy and for the government is to slash spending, now by 15%/25%. Get real!

Disagree - what you are proposing is that you tell your wife (or perhaps your wife tells you) that the new car will have to be sold to bolster the family finances.

Unfortunately that means that you cant get to work and so you and everybody else is actually in a worse position than if you had kept the car.

ILW

Loughton_Monkey wrote: »

Some misconception surely?

If I want to buy FTSE shares (or any derivative backed by them), then I can only buy them from a "disinvestor". Apart from the occasional 'rights offer' etc. the number of shares is fixed. We can all rush in buying/selling them but neither action adds a penny to "investment" in British Business.

It is indeed the savers who are (theoretically) the ones to save the day, by providing extra money to banks to lend out. Partly mortgages, and partly to small business.

THe fact that banks are hoarding rather than 'investing' could be the issue.

Great post.

Thrugelmir

Linton wrote: »

Disagree - what you are proposing is that you tell your wife (or perhaps your wife tells you) that the new car will have to be sold to bolster the family finances.

Unfortunately that means that you cant get to work and so you and everybody else is actually in a worse position than if you had kept the car.

Why the requirement to have a new car though?

ILW

Linton wrote: »

Disagree - what you are proposing is that you tell your wife (or perhaps your wife tells you) that the new car will have to be sold to bolster the family finances.

Unfortunately that means that you cant get to work and so you and everybody else is actually in a worse position than if you had kept the car.

Or you just get more efficient and get a job close to home.

paso11

Loughton_Monkey wrote: »

Hence, public spending should have gone down by a huge amount just to match it with income to stop the debt rising. And then on top of that, it should come down by a massive amount simply because income has taken a dive. Huge + Massive = Drastic cuts. What we are seeing, though, is piddling, insignificant spending cuts, just starting to come through 5 years into the recession.

And lets face it, what we have is a moderation in the rate of increase not real 'cuts' hence the use of the word austerity is a little far fetched

Loughton_Monkey

Linton wrote: »

Disagree - what you are proposing is that you tell your wife (or perhaps your wife tells you) that the new car will have to be sold to bolster the family finances.

Unfortunately that means that you cant get to work and so you and everybody else is actually in a worse position than if you had kept the car.

I think you miss my point.

Selling the car would be a logical thing to do. Freezing benefits/pensions in 2008 would also have been sensible. I was simply giving an example of the husband ignoring common sense the same as the government. [i.e. too little, too late].

I'll say it again. Our beloved government started with structural debt requiring ever-expanding borrowing. When the doo-doo hit the fan, and households spend less and GDP goes down, then as night follows day, tax revenue can only dive to compound the issue. This is why 'austerity' should have been bigger and quicker than it was.

If I had a year's salary as debt, and faced a 10% salary cut, I'd do a bit more than change to own brand beans in 6 months time - which is about as 'drastic' as cutting child benefits for £50K+ households 4 years after global meltdown!

grizzly1911

Loughton_Monkey wrote: »

I think you miss my point.

Selling the car would be a logical thing to do. Freezing benefits/pensions in 2008 would also have been sensible. I was simply giving an example of the husband ignoring common sense the same as the government. [i.e. too little, too late].

I'll say it again. Our beloved government started with structural debt requiring ever-expanding borrowing. When the doo-doo hit the fan, and households spend less and GDP goes down, then as night follows day, tax revenue can only dive to compound the issue. This is why 'austerity' should have been bigger and quicker than it was.

If I had a year's salary as debt, and faced a 10% salary cut, I'd do a bit more than change to own brand beans in 6 months time - which is about as 'drastic' as cutting child benefits for £50K+ households 4 years after global meltdown!

I take your point on cuts are needed or income generation.

Part of the problem is we have ramped up the"bill" over decades, we have steadily inflated or own worth as a nation and then borrowed to keep that myth alive both at government level and personal level. In fact the government have encouraged the populace to get into debt to help the illusion.

Governement spending has inflated with it and with inadequate policies over numerous parliaments in assets, employment and welfare we have drifted us up a creek due to not having a long term strategy.

The governement can't simply turn off the taps, they created the monster.. It is stuck with an overhead. No different to Comet with all it's long leasehold expensive sheds.

Unfortunately it also seems unable to do anything substantial to generate the income either. The banks are taking the blame but IMO their is little volume demand.

Some of the cuts would be more palatable if they started attacking some of the other low hanging fruit, even though modest, not just welfare and NHS but they seem loathe to even take the first steps.

rickbonar.

Loughton_Monkey wrote: »

Some misconception surely?

If I want to buy FTSE shares (or any derivative backed by them), then I can only buy them from a "disinvestor". Apart from the occasional 'rights offer' etc. the number of shares is fixed. We can all rush in buying/selling them but neither action adds a penny to "investment" in British Business.

It is indeed the savers who are (theoretically) the ones to save the day, by providing extra money to banks to lend out. Partly mortgages, and partly to small business.

THe fact that banks are hoarding rather than 'investing' could be the issue.

Agreed it is the savers and depositers that provide the money the banks can lend but in this economic state .. asking house/property prices that are in reality well over what common earners can pay back over a 15 to 25 year term. Businesses may be a better bet but again in this climate a gamble....Comet are in administration! and other well established companies are failing.

The banks don't want to chance newbie businesses that have high premises costs and other overheads directly and indirectly relatedly to overpriced property values.

No bank can reasonably lend in this state.

The housing market needs some correction and interest must rise slightly to start the ball rolling if there is ever to be a recovery.

PaulF81

They should have cut the state pension or at least reduced significantly the period of grandfather rights for the age increases.. Blinking cheek the boomers getting grandfather rights when they are the ones in the main who got us I this mess!