Jeremy Warner on the Budget

Wookster

Well balanced and thought out article as usual from him!

As can be seen, there has basically been no recovery; more than four years after the collapse of Lehman Brothers, the economy is still "bumping along the bottom". Nor, as things stand, does there appear much prospect of one.

Output is going nowhere, a trend confirmed in data this week showing another lurch downwards in industrial production. Even the two great defining economic contractions of the inter-war years showed faster recoveries than this one.

t's all very well blaming declining North Sea oil production and financial sector shrinkage for the flatlining economy, but excuses are no substitute for action. The voters are impatient for solutions, and tired of the "there is no alternative" message. There are always alternatives, though the Coalition's rigid adherence to a Soviet-style five-year plan has certainly made the necessary flexibility very difficult.

Full article here: http://www.telegraph.co.uk/finance/comment/jeremy-warner/9928502/Labours-toxic-legacy-has-become-a-bad-excuse-for-doing-nothing.html

Graham_Devon

He does sound pretty decent....

We can quickly dismiss the idea that the problem lies with too much austerity.

And one for Hamish, which describes the overseas stuff he's so desperate to write off much better than I could ever dream of...

A lot of this was overseas lending, or simply the absurdity of multi-layered, back to back, derivative activity, but it has left UK plc with one hell of a debt hangover, and has resulted in a still deeply impaired banking system.

Infact, it's a bloody good read. Especially the bit about how we racked up debt in the 10 years pre crisis, and how the mirage of low public sector debt was just that....as as soon as it went wrong, the private sector crumbled, instantly leaning on the public sector.

Thanks Wookster.

Thrugelmir

Good article. Yet appears impatient with what was always going to be a long term rebuilding exercise. Consumer debt is the biggest problem by far that needs addressing. To get a full recovery under way and accelerate the financial strength of the banks.

Wookster

Thrugelmir wrote: »

Good article. Yet appears impatient with what was always going to be a long term rebuilding exercise. Consumer debt is the biggest problem by far that needs addressing. To get a full recovery under way and accelerate the financial strength of the banks.

While I agree with you, its pointless having ideas and doing the right thing if you lose power. I think people understand that things are tight, but as Jeremy Warner points out (better than I can) they the coalition are sticking to their plan with Soviet style rigidity.

The drags on growth, have been construction, their is a huge shortage of houses. The answer to the coalition's problem is right there!

grizzly1911

I wonder what that graph would look like if it were extended backwards to - 4 years?

Is it the size of the dive that has been to deep? Did we go off the top board rather than the poolside spring board?

Perhaps we are expecting to get out the pool when the best we can expect is to float and not sink.

They simply don't have the capacity to make tax cuts that most normal souls would notice. If they did it would only give relief from the escalating basic costs of energy, fuel, food, shelter.

Cameron was asked at question time today about providing some form of fuel duty/tax relief. All he could spout was "if labour had been in power it would be 10p more now". The excuse is now worn out, as is the constant legacy argument, there is no guarantee that labour wouldn't have rescinded the planned increases either.

This is the bit that concerns me.

Not until this debt overhang has been removed will bank lending and the economy rediscover their dynamism, which is why Sir Mervyn King, Governor of the Bank of England, was right to suggest nationalisation of the legacy problem by splitting the likes of Royal Bank of Scotland into good and bad banks. Governments are better suited to managing big debt workouts than private-sector banks.
Any such notion would be grossly unfair on those who sat out the dance, but some form of debt forgiveness needs to be considered. When the debtor over- extends himself, it is always the creditor who ends up paying. Unjust and shot through with moral hazard this may be, but it's better than the present affliction of zombie households, banks and businesses unable to spend, lend or tolerate any significant rise in interest rates.



Just what does debt forgiveness meanand how soon, would those forgiven, at our expense, be racking up the debt all over again.

grizzly1911

Wookster wrote: »

The drags on growth, have been construction, their is a huge shortage of houses. The answer to the coalition's problem is right there!

If were controlled as government project and became an asset on the books to balance the debt I would agree. To flush it into the private sector I am not so sure.

Graham_Devon

grizzly1911 wrote: »

Just what does debt forgiveness meanand how soon, would those forgiven, at our expense, be racking up the debt all over again.

Very good point, as this (taking on more debt) is exactly the aims of the BOE and the government.

I suppose if you write some off, it creates a hole that can be filled with new money and that new money can be spent. But right now, I'm not so sure those who would take on debt to spend would actually get the loans in the first place.

The other side of the coin is that if you write off some debt, you free up £10, £50, £100 etc of a households budget each month, dependant on how much you write off. But the probem of fairness would be a very very sore point.

Imagine you have spent 2-3 years doig all you can to pay down your debts, only to find your neighbour who was a little less concerned has had his "forgiven".

grizzly1911

Graham_Devon wrote: »

Very good point, as this (taking on more debt) is exactly the aims of the BOE and the government.

I suppose if you write some off, it creates a hole that can be filled with new money and that new money can be spent. But right now, I'm not so sure those who would take on debt to spend would actually get the loans in the first place.

The other side of the coin is that if you write off some debt, you free up £10, £50, £100 etc of a households budget each month, dependant on how much you write off. But the probem of fairness would be a very very sore point.

Imagine you have spent 2-3 years doig all you can to pay down your debts, only to find your neighbour who was a little less concerned has had his "forgiven".

It will undoubtedly have a negative impact on millions of people who don't need to be forgive. Those without debt who nobody gives two hoots about.

Thrugelmir

Graham_Devon wrote: »

The other side of the coin is that if you write off some debt, you free up £10, £50, £100 etc of a households budget each month,

At the moment its the taxpayer that may pick up the cost, as banks suffer further losses. So merely shuffles the deck around. People themselves have the answer. As they need to cut back for a while and bring their own budgets back under control.

Graham_Devon

Thrugelmir wrote: »

At the moment its the taxpayer that may pick up the cost, as banks suffer further losses. So merely shuffles the deck around. People themselves have the answer. As they need to cut back for a while and bring their own budgets back under control.

Which is hard when everything is going up in price around you. I suppose it just extends the problem.

Thrugelmir

Graham_Devon wrote: »

Which is hard when everything is going up in price around you.

No one said austerity was painless. Life has become far too comfortable.