Re: How do cutbacks save economies? : Sun Oct 14, 2012 6:07 pm  

What people are conveniently ignoring is that Labour presided over a cheap credit, debt-fuelled bubble and singularly failed to pull the reins on when it was clear to serious commentators that things were getting out of hand. That mistake far outweighs any other economic incompetence shown by British governments in a very long time. The problem was then compounded by atrocious mishandling of the initial stahes of the crisis - notably Northern Rocxk and more particularly HBoS. The British people will be paying for these catastrophic errors for a long time to come.

Re: How do cutbacks save economies? : Sun Oct 14, 2012 6:21 pm  

Dally wrote:

What people are conveniently ignoring is that Labour presided over a cheap credit, debt-fuelled bubble and singularly failed to pull the reins on when it was clear to serious commentators that things were getting out of hand. That mistake far outweighs any other economic incompetence shown by British governments in a very long time. The problem was then compounded by atrocious mishandling of the initial stahes of the crisis - notably Northern Rocxk and more particularly HBoS. The British people will be paying for these catastrophic errors for a long time to come.

And what do you suggest may have happened if Brown had let "the market" take care of Northern Rock & HBoS?

Re: How do cutbacks save economies? : Sun Oct 14, 2012 6:41 pm  

Ajw71 wrote: But not Labour from 1997 until 2001. Since WW2 the UK has officially been in recession during the following periods: 1973-1975 1980-1982 1990-1992 2008-Present So, officially we have not been in recession during: 1946-1972 1976-1979 1983-1989 1993-2007 Then take a look at these data sets and you'll see that in the years 1946-2010 we were in surplus for 35 of those years and in only 23 did we not borrow more than we received. Then look at the party in power at the time of borrowing. You have conveniently (for you), chosen a 4 year snapshot of the last Labour administration and shown nothing but your ignorance.

Ajw71 wrote: But not Labour from 1997 until 2001. Since WW2 the UK has officially been in recession during the following periods: 1973-1975 1980-1982 1990-1992 2008-Present So, officially we have not been in recession during: 1946-1972 1976-1979 1983-1989 1993-2007 Then take a look at these data sets and you'll see that in the years 1946-2010 we were in surplus for 35 of those years and in only 23 did we not borrow more than we received. Then look at the party in power at the time of borrowing. You have conveniently (for you), chosen a 4 year snapshot of the last Labour administration and shown nothing but your ignorance.

Re: How do cutbacks save economies? : Sun Oct 14, 2012 6:52 pm  

Ajw71 wrote:

What dogma is this you keep talking about?

Please explain?

There are two other more than adequate explanations since your question so I'll not bother other than to recommend that you read them and admit, at least to yourself, that the lines that you've been spoon fed by someone, just don't stand up to scrutiny.

I'd still love to know who it is thats standing behind you feeding you this stuff.

Re: How do cutbacks save economies? : Sun Oct 14, 2012 8:16 pm  

Dally wrote:

What people are conveniently ignoring is that Labour presided over a cheap credit, debt-fuelled bubble and singularly failed to pull the reins on when it was clear to serious commentators that things were getting out of hand. That mistake far outweighs any other economic incompetence shown by British governments in a very long time. The problem was then compounded by atrocious mishandling of the initial stahes of the crisis - notably Northern Rocxk and more particularly HBoS. The British people will be paying for these catastrophic errors for a long time to come.

I agree with you that the financial crisis was far more down to excess credit and an asset bubble (property prices) than deficit spending, the deficit argument is a false alibi. However to say Labour "singularly failed to pull the reins" on it is wrong. The UK government did not have enough power to stop the phenomenon of poorly allocated lending which was a global problem and really was driven by the largest market, the USA.

A bigger culprit was the Fed and the US regulators as you are right serious commentators had noticed things were getting out of hand. The big problem was the financial instruments that had been developed eg securitisation, where bundles of good and bad debt were packaged together and sold on to third parties, where the bad debt was disguised and buyers did not understand that large parts of it were based on loans that were bound to default. This broke the link between the party making the loan and bearing the risk of default - so it encouraged lenders to actively target high risk borrowers to make loans and then package them up and sell them on so someone else bore the risk. Inevitably this meant that there was a lot of lending that was not efficient in market terms - lenders knew that the borrower would probably default but they had a way of passing the risk onto an unwitting third party (often pension funds etc). Then you had the problem of insurers selling insurance on debt that they weren't able to accurately price in terms of risk, so the global insurance system was exposed to major risk as well. In practice probably both the banking system and insurance system realised they were playing with fire but bet on the fact that if it all went wrong the consequences would be so catastrophic for the market economy that governments would be forced to step in with taxpayers money and bail them out.

Add to this the large global imbalances caused by a number of countries running large trade surpluses (China, East Asia, Germany) and a number running large trade deficits (USA, UK, Western Europe apart from Germany) and you create a situation where the countries with surpluses have excess funds that they want to invest by lending, which means there are large lending flows coming from Asia to the USA and Europe looking for a market for borrowing. This is why lending was so plentiful and cheap but also why there was so much debt accrued.

There is no way an individual national government that is not the USA would have been able to stem this tide. However I believe there should have been a lot more regulation of the UK banking and lending sector, but there is a lot of opposition (especially from the Conservatives) that its not the government's role to intervene in the market and that any attempt for extra regulation would have just forced the banks to relocate elsewhere and take their business with them. Personally I think we should have called their bluff, because our banking sector was too large, and reducing the size of it would have freed up resources to go into more productive sectors (not least all the Cambridge and Imperial Engineering graduates that are lured into the City rather than leading UK's advanced manufacturing sector). But it is hard enough to make that call-their-bluff argument now, impossible before the crash when the banks were making hefty profits every year.

It is ironic that a lot of people on the right are condemning a Labour government for failure to regulate the banking sector and pointing at China as an example of an economy that is going to take over the world and leave us behind. Surely the conclusion is that Western free market liberal capitalism is broken and the way to go is to have a state directed economy as you have in China where the state determines where lending can be allocated. I wonder if the right wingers in the UK, the Tories, their chums in the banking sector, would be pleased with the UK following the Chinese model?

[DaveO]

Re: How do cutbacks save economies? : Mon Oct 15, 2012 12:03 pm  

sally cinnamon wrote:

It is ironic that a lot of people on the right are condemning a Labour government for failure to regulate the banking sector ....

It is not ironic it is hypocritical. The Tories in particular were calling for less regulation right up the crash itself in 2008. I think it was Cameron who made as speech literally two weeks before the proverbial hit the fan arguing for less regulation in the banking sector.

Re: How do cutbacks save economies? : Tue Oct 16, 2012 8:01 am  

Since I earlier mentioned that there is no need to increase taxation ... Starbucks pays almost nothing. This needs sorting.

Since I earlier mentioned that there is no need to increase taxation ... Starbucks pays almost nothing. This needs sorting.

Re: How do cutbacks save economies? : Tue Oct 16, 2012 8:08 am  

Mintball wrote: Since I earlier mentioned that there is no need to increase taxation ... Starbucks pays almost nothing. This needs sorting. What with Vodaphone, Amazon, Facebook and now Starbucks all hitting the headlines for utilising "tax-efficient schemes" to (legally) avoid paying UK tax, how difficult would it be to ensure that tax receipts owed on goods and services provided in one country, are paid in that country? One thing is certain, the companies mentioned wouldn't be upping sticks and relocating anytime soon. One thing is certain, the US tax collectors wouldn't allow Starbucks to continue in this way, they'd have hit them with a back-tax bill already.

Mintball wrote: Since I earlier mentioned that there is no need to increase taxation ... Starbucks pays almost nothing. This needs sorting. What with Vodaphone, Amazon, Facebook and now Starbucks all hitting the headlines for utilising "tax-efficient schemes" to (legally) avoid paying UK tax, how difficult would it be to ensure that tax receipts owed on goods and services provided in one country, are paid in that country? One thing is certain, the companies mentioned wouldn't be upping sticks and relocating anytime soon. One thing is certain, the US tax collectors wouldn't allow Starbucks to continue in this way, they'd have hit them with a back-tax bill already.

[DaveO]

Re: How do cutbacks save economies? : Tue Oct 16, 2012 11:05 am  

cod'ead wrote:

What with Vodaphone, Amazon, Facebook and now Starbucks all hitting the headlines for utilising "tax-efficient schemes" to (legally) avoid paying UK tax, how difficult would it be to ensure that tax receipts owed on goods and services provided in one country, are paid in that country? One thing is certain, the companies mentioned wouldn't be upping sticks and relocating anytime soon.

There has been a proposal in the EU for some time to do exactly as you say. It is called the Common Consolidated Corporate Tax Base and has been kicked around as an idea since 2001. It has been considerably watered down since then even including the idea of an option to opt out for companies (which seems to defeat the object!) and the reason this has happened is the continued opposition to the idea from the likes of Ireland and unsurprisingly the current UK government.

Personally I think we should go it alone and simply insist a companies profits made here are taxed here. It is not acceptable that companies benefit from the infrastructure the UK provides which allows them to trade here and make profits here without contributing to its development and upkeep via taxes.

Re: How do cutbacks save economies? : Tue Oct 16, 2012 12:23 pm  

The economist Fritz Schumacher suggested scrapping corporation tax and, instead, requiring that every share a company issues should be matched by another, non voting, share given to the government. Now, this was in the days before multinationals were as prevalent as they are now, but it still merits thinking about.

The economist Fritz Schumacher suggested scrapping corporation tax and, instead, requiring that every share a company issues should be matched by another, non voting, share given to the government. Now, this was in the days before multinationals were as prevalent as they are now, but it still merits thinking about.