9 reasons Keynesians (and Hamish) aren't winning the argument

CLAPTON

If there is s shortage of money because the government borrowing is crowding out the private sector, then why is the price of the product so low?

Generali

CLAPTON wrote: »

If there is s shortage of money because the government borrowing is crowding out the private sector, then why is the price of the product so low?

Is the price low? What's the spread between Gilt yields and company loans right now? My guess is it's at a multi-decade high.

the_flying_pig

Hamish is a pwoperdarian. That's quite different to Keynesian.

CLAPTON

Generali wrote: »

Is the price low? What's the spread between Gilt yields and company loans right now? My guess is it's at a multi-decade high.

I'm not really sure which interest rate figure one should be looking at; the general point is that interest rates are extremely low

Generali

CLAPTON wrote: »

I'm not really sure which interest rate figure one should be looking at; the general point is that interest rates are extremely low

There's a thing called the spread. It's the difference between one sort of borrowing and another and it's generally used to compare borrowing costs.

One of the first signs of stress in the Eurozone for example was the spread between PIIGS and German borrowing costs getting wider.

In 2006, Greece was paying about 0.2% more than Germany to borrow money. In 2009 the difference was more like 5%.

ruggedtoast

An important part of any kind of strategy is knowing what you expect to achieve out of it.

Throwing money at the economy until something happens, is as misguided as slashing spending until something happens.

I haven't seen any sensible outline as to what the goal for the UK's economic future is, the reason I suspect being, that regardless of what plan we follow we aren't getting back to being 'rich' at any time in the foreseeable future.

Well, they are of course, the Osborne's and the Cameron's and the Eton set aren't going to without any of the power and luxury they have made themselves accustomed to. They certainly aren't going to do much to create any kind of meritocracy, and for all their fine words of the future of schooling, the Ruperts and Camillas with their £30,000 a year school fees aren't going to be allowed to be in any danger of being outperformed by their state school counterparts.

The fact is that whatever happens, with the UK's current policy of feed the rich, all we will see is slowly declining living standards and growing inequality between them and us.

CLAPTON

Generali wrote: »

There's a thing called the spread. It's the difference between one sort of borrowing and another and it's generally used to compare borrowing costs.

One of the first signs of stress in the Eurozone for example was the spread between PIIGS and German borrowing costs getting wider.

In 2006, Greece was paying about 0.2% more than Germany to borrow money. In 2009 the difference was more like 5%.

ok
so you are saying the difference between government borrowing (gilts) and company borrowing costs is a better indicator of government crowding out than say the absolute interest rate?

Generali

CLAPTON wrote: »

ok
so you are saying the difference between government borrowing (gilts) and company borrowing costs is a better indicator of government crowding out than say the absolute interest rate?

Yes I am.

The rate at which a Government can borrow in local currency is known as 'the Risk Free Rate'. You can be pretty sure you'll get your money back because if it comes to it the Government can simply print money to repay you.

A measure of the price of risk is the difference between the Risk Free Rate and the cost of borrowing where risk is attached to the loan.

StevieJ

Thrugelmir wrote: »

Followers of Keynes also omit one key element of his works.

Save in the good times to pay for the bad times.

Keynes did not promote a spend spend spend policy.

I am a little confused about this thread, is it having a go at Keynesianism or some Labour politicians economic policy?

9 reasons Keynesians (and Hamish) aren't winning the argument

Graham_Devon

StevieJ wrote: »

I am a little confused about this thread, is it having a go at Keynesianism or some Labour politicians economic policy?

Does it matter?

You'll be offended by both

It's more about thsoe who follow the Keynesian theory in the bad times, but follow another theory in the good times. I.e. switch the throey they like dependant on the economy.

A true Keynesian would pay down in the good times, not spend excessivley to provide unfettered growth based on ever more debt.

Would the person named follow Keynes in the good times? Call to pay debt down at the expense of possible growth? You could bet every last dime you had they wouldn't. It would be straight back to pyramid schemes.