As the leaves turn gold, the world economy chills

AN OBLIQUE OBSERVATION

Incapability Brown trumpets that he alone - through DEEP UNDERSTANDING of global finance - saved the world from monetary collapse. But where was his understanding when the potential collapse was brewing?

The error of the Titanic's captain, surely, was to allow his ship to HIT the iceberg, not his brilliance (if such it were) in deploying lifeboats?

The fool or knave choice looms again.

My big fear about the Coalition in the UK is not the coming cuts in Public Sector spending and jobs but in their lack of any clue as to what are we going to do then?

They keep saying that the Private Sector will pick up and drive the economy but how?

Politicians in the UK seem to have so little, virtually nil, Private Sector real business-World experience that they appear to think that businesses can somehow magic jobs and growth and wealth. This after a decade of SMEs being beaten down, taxed to the hilt and generally considered to be somehow inferior to the Public Sector.

There is no vision.

There appears to be no plan. Just cross our fingers, hope for the best and give the banks as much cash as possible.

In the 1930s Roosevelt ploughed money in real things - building roads, building dams, fertislising the fields, building factories, building houses.

What are we doing now - nothing!

A high speed rail link has been announced but it is years away in planning let alone in the building. The 850 billion spent on saving the banks could have transformed the infrastructure of the UK from road to rail to broadband to housing to... to transforming us into a vibrant economy again which actually engineers, designs and makes things.

The UK appears to be in the process of going back to a central core based around the banks in the City, leaving a scorched earth policy behind in the rest of the UK.

Scotland, Wales and the English regions appear to be the ones about to be sacrificed in order to rebuild the banks and, hopefully, rebuild the UK. The Public Sector areas of the UK are about to be devastated - like the Emperor Honorius watching the Visigoths come over the Seventh Hill, I doubt that many in those parts of the UK truly understand what is about to befall them.

At best the powers that be are hoping to repeat what has already failed by focussing everything on and about the City.

No longer a nation but a City state in more sense than one.

Then the cycle will begin again... in theory.

At worse, which seems even more likely, they simply don't have a clue.

I had better stop typing now otherwise Vince Cable will be knocking on my door blaming my use of a computer for all of Britain's ills. My next post will be on parchment and delivered by carrier pidgeon.

Unfortunately Bernanke monumentally fails to see that it was sheer hard work and petro based industrialism that pulled the West out of the great depression:

https://www.bedfordfunding.com/images/trends_01.gif

Reading Carlota Perez you get a sense that the world had to adjust to monumental changes in REAL productivity and production. The shift from mainly coal based infrastructure to oil / petroleum took us through to the 60s / 70s.

I'm still not convinced that the digital revolution is the next engine of growth. The growth from China and India is far more from heavy industry type growth that closer emulates our emergence from the 1930s than a symbol of post-modern prosperity. High finance and modern technology are merely a means for the West to outsource production offshore whilst sedating those at home with mass consumption.

The sirens from the City of London may have a beautiful song, but they are luring us ever closer to the jagged rocks.

AND ANOTHER THING (#2)

Government (epitomised in Blair) are dazzled by the Joneses (Digby, Sir John Harvey-) and their poseur ilk. But real nous lies with the small businesses, innovating on a sixpence, and problem solving (both practical and financial) as a matter of course.

Our little business competed successfully with big names, broke every Harvard Business School Rule there is, and got out on OUR terms.

Politicians are not PRE-selected for competence and nous, but for tractability and ambition. While party politics thrives under the Westminster Ethos, it will continue, and we will pick up the carp.

They don't WANT to know realities - for them it is just a game.

SPOILPARTYGAMES

The problem is debt: as it was in the beginning and ever shall be until there is none.

The problem with the concept of stimulus is that you add to the debt in the hope of achieving growth which might then eliminate the debt, albeit gradually. Now we have had the stimulus, the effect has been only partial and that only because it pumped a few bubbles back up again. The original problem of debt remains along with its deflationary risks.

This is why the political view changed earlier this year when it became apparent that the banks, having ripped off their pound of flesh from the taxpayer, were now determined to whack the taxpayer again through the consequential government debt. Hence the austerity.

It is rational to expect that the balancing of the UK fiscal budget could have a negative impact on the economy. But what is the alternative? A run on sterling and even more inflation? We might even get that despite the austerity measures. So where do we go from here?

We need to be clear in understanding that debt is the problem and the cause of our circumstances. It has destabilised everything. There is too much of it and it needs to shrink.

We also need to appreciate that if we allow the economy to slide too far too fast that debt problem will only get worse and then spiral as it has done in the US. So for the time being it just has to be steady as we go robbing Peter to pay Paul due to the complete absence of alternatives.

However unless we eventually return to sound money, there will be no recovery at all. There has to be a measure of value to ensure there can be a return on investments made to develop growth. At the moment there is none and hasn't been since well before the crunch.

I note interest rates are climbing albeit slowly. I believe that the harsh economic realities of everyday life still remain and will eventually push through. We need to find ways to encourage those economic realities rather than continue subsidising the fantasists.

To this end the government needs to get out from behind its desk and facilitate the development of SMEs. The answer to the debt is to be found in productive, rewarding and profitable businesses. Over to you Vince. I agree it is not a trouble-free strategy either.

Welcome back, Paul.Nice to hear from you on Idle Scrawl.
#stanilic
You are absolutley right to hone in on debt and real worth. But, I would mention the process of deleveraging and lack of credit as matters of serious concern. Western households,corporates, financials and sovereigns are all paying down debt at the expense of fixed investment and growth.Central banks have tried to dull the pain. I agree with Paul that attention now turns to trade and exchange rates but I see a murkier picture where owners of global surpluses manipulate policies and markets for their own national advantage and deficit-economies become increasingly resentful and suspicious. The dollar is a credit-based international reserve currency which forces a marriage of convenience, but for how long?

Below is a very interesting article on the lack of new jobs being created in this so-called recovery in the US.

Assuming you believe that there is a real recovery underway, and that is open to discussion here, the reality is that if you set up a successful business in the US you end up paying about 75% of your income over your lifetime in tax.

Worse, as almost every self-employed person in the UK knows, you are slightly better off in tax terms setting up a business in the US as opposed to here in the UK. How much do UK entrepeneurs pay in tax over a lifetime here for taking all the risk?

Why take the risk?

It is worth a read.

Thanks to Merryn Somerset Webb at Moneyweek for pointing me in the direction of this article.


This Is Why There Are No Jobs in America
https://www.dailywealth.com/1449/This-Is-Why-There-Are-No-Jobs-in-America


No wonder all the super rich keep the benefit of British passports and then live in Monaco or the Caymans.

good holiday Paul?
as you put it...
"So the next phase of the crisis is going to be characterised by two questions:
Can economies find sources of growth in the private sector, and exports, as their public-sector stimulus runs out?"
Private sector led growth will demand capital that has an appetite for risk and this will be expensive even if interest rates are rock bottom. Not impossible to find but scarce in the current global economic environment. Private sector led growth requires that exploitable markets exist which are not contracting that effectively rules out a UK domestic demand solution. OK you may say the BRICs are expanding relatively healthily, but in development terms they will be seeking indigenous solutions to meeting their growth needs, not pulling in expensive UK based goods & services. While private sector substitutes for public sector GDP, there will not be a seamless transfer. The welfare safety net will pick up the slack over any transition, reducing any saving on the deficit. There will also be private sector losers as out-sourced public services contracts are cancelled. The danger really is of deflationary multiplier setting in. Bleak indeed.
And will this lead to some major redrawing of the global currency and trade map?
Presumably you allude here to the classic "inflate your way out of the debt problem" which the USA, staring down the barrel of the gun would dearly love to do but is constrained as a reserve currency. Any action by the US to transfer the pain via exchange rate will screw China (political ramifications) and also hobble the Euro area finishing off the UK's major markets, unless the GBP is also left to sink. If we don't follow devaluation competitively you can forget export led growth as a solution as we would have to face up to the fact that we are too expensive on a global measure = pay ourselves too much.
Let us never forget that without growth used to pay off our debt the only way to remove the problem of debt is to inflate our way out or default.
You wouldn't bet against further stimulus but that has to be directed where you need growth to be nurtured, not to repair bank balance sheets.

Paul,

You are good at stepping back & looking at the big picture.

This Autumn could see Panic part 2.
As you rightly infer, this time there's very little to stop the capitalist economy going off the cliff edge.

The end of the US dollar as the only petro-currency?

#9 DV

And the 2nd phase could happen quite soon:

https://maxkeiser.com/watch/on-the-edge/episode-68-28-august-2010-guest-dr-joern-berninger/

Whether it happens within 3 weeks, as this chap suggests, or 3 months or 3 years, you can be sure it will happen quickly.

So many fires being fought at the same time it has to make you wonder when we will reach the perfect storm if we're not already there.

We'll know when the computer models go into nervous breakdown mode and blow up altogether or just keep throwing out more gobbledegook.

We can only leave the rest of the world to carry on pulling their different levers for there's no chance of such a thing as a global solution.

Concentrating on our own difficulties is enough to be going on with.

There could still be a few jokers that haven't been thought through on our own economy.

Like who is holding all the personal profits made during the housing boom and how are they going to spend it. Still masses of cash out there somewhere just waiting to be untilised.

And if house prices fall but interest rates are low who if anyone will suffer apart from some having negative equity for a few years. This being the bulk of the shifting sands of debt as Nick Clegg put it that we have to rid ourselves of before the economy can begin to prosper again.

The recession began with huge debt for some but massive profit for others based on a pyramid scheme of gigantic proportions within the property market. A big rebalance needed here.

I'm not sure that the public sector cuts will have such a devastating effect on the economy overall for most of those who leave will either go through early retirement or redundancy so unlike private sector workers some will be re-employed in other departments or will have some form of golden handshake or final salary pension.

All in all I don't think there is too much to worry about as long as someone can come up with some creative ideas for new companies and have or can get hold of the capital to get them off the ground. This has never been a problem in the past. This is where a new government backed investment bank could come in utilising some of that spare cash floating around.

So if the economy is alright then who isn't.

I guess it must be the countries themselves. That is the one big crisis we may yet have to face. I'd like to know how the computer model sees that one.

6 shireblogger

The process of deleveraging should in my view be well advanced. It is now almost two years since the crunch and certainly almost eighteen months since QE started. In my broad experience if a business does not turn around to start generating cash within two years of a calamity then there is a deeper problem that just a few accounting issues. The management might need to be changed, the business concept reviewed and the way to market reassessed among other things.

The banks have been on the taxpayer drip-feed sufficiently long enough to begin to come off it. Their managements are making bullish noises and I won't go near the bonus issue. Time for the bank managements to either shape up or ship out. They would do it to us if they could, so lets get in first to ensure better managements are in place before 2012.

There remains the issue of private debt to the tune of GBP 1.2 trillion. Now this does bother me even though none of it is mine. I suspect most of this is secured against property values. Now that is a pity as property prices are starting to slide as the bubble induced by low interest rates subsidised by the saver gradually deflates. This is going to hurt a lot of people who have been allowed to think that they are middle class. Sorry, but this nasty adjustment is going to be necessary so that we can get our domestic costs under control.

Others here talk about exchange rates and changes to world trade. These are inevitable.

Over the last twelve years or so I have seen the manufacture of very saleable product being exported to the Far East. At the start of the trend it was obvious that it was being driven by cost. This did not necessarily benefit the UK consumer as the commercial gain was absorbed as additional profit margin by the brand owner. Now production costs in the Far East are going up, freight charges have increased dramatically this year and the cost of commercial finance does not reflect the half per cent base rate.

What is wrong with switching manufacture back into the UK? Supply chains will be shorter, less stock needs to be financed and warehoused, less fuel is consumed and so on. I won't get into all the green cliches either. Surely, it should be simple to repatriate some of the industry we lost those few short years ago? It is not as if the UK worker was ever paid a fortune.

What does concern me more than anything else is that there seems to be a readiness to feather-bed particular sections of the community whilst at the same time throwing others off the back of the sledge. Is the sort out going to be based on vulnerability? In my view management is far too sloppy, it has lost the plot, it is focussed on survival so it needs a good hard kick up its collective fundament.

We either evolve as a society or collapse as a civilisation.

"11. At 6:00pm on 31 Aug 2010, virtualsilverlady wrote:
So many fires being fought at the same time it has to make you wonder when we will reach the perfect storm if we're not already there."

The markets love uncertainty as it translate into price volatility, i.e short-term gain whether bull or bear. The press serves as a useful tool in this respect. It makes punters buy and sell. In a nutshell, that's the problem with this system today. Computerisation has not led to efficiency and rationality but churn - the system has 'learned' that fear is good for making money.

"Over the last twelve years or so I have seen the manufacture of very saleable product being exported to the Far East. At the start of the trend it was obvious that it was being driven by cost. This did not necessarily benefit the UK consumer as the commercial gain was absorbed as additional profit margin by the brand owner. Now production costs in the Far East are going up, freight charges have increased dramatically this year and the cost of commercial finance does not reflect the half per cent base rate.

What is wrong with switching manufacture back into the UK?"

What's wrong is that China uses its state run industries to support growth of its state (infrastructure) and that's in support of its people, whilst right-wing neo-liberal (anarchistic) economies )West and Japan etc) privatise profit and strip their public sectors assets, with absolutely no national loyalty whatsoever anymore. Many of the big business owners are non doms, i.e internationalists or cosmopolitans.

Only socialist countries care to build their states these days.

Many of us don't or won't accept what's been going on as it is contrary to all we hold dear, our liberal notions of freedom. Might we have been a little too close to the rhetoric of neo-liberal free-world economics to see just how predatory it's been whilst PR machines were spinning tales of freedom and choice? China and its allies are killing the liberal-democracies by letting them collapse into debt. As others have pointed out, the USA can't inflate its way out of the problem as it's the leading reserve currency.

"whether this tips over into a whole-economy double-dip depends on whether George Osborne and numerous conservative think tanks are right in expecting a boom in private sector investment and in UK exports"

I'm grateful for the article, but where will those UK exports come from, i.e what will the private investment be in? Japan is in trouble, but look at its industries. Like here, presumably much of it has moved to (been outsourced to) where labour was cheaper, namely India and China?

The only think that right wing think tanks seem to be good for is clobbering what is left of the public sector. Haven't we seen this rhetoric before, i.e when it was done in the early 80s? There was a boom as all t hat was liquidated, and then a bust. Since then we have just continued to lose our competitive edge to places where labour was cheaper and now we are indebted to them in the same way that the USA is.

We continue to try to import cheap labour to compete, whilst reducing the size of our indigenous population at the same time, but the problem as I see it (and I'm not the first to point this out) is that the countries with greater economic growth have much larger populations (than the whole of Europe put together) , and in the case of China, it controls its population so that it keeps producing more and more able people, so not only does it make the best use of its labour, but it skilfully manages it and thus its economy too. How CAN we compete if we have hands off government by design.

I return to my main question:

where will those UK exports come from?

Good to see you back Paul and on form.

Time for a quick post before I help the Mrs chop some onions (or similar).


We bailed out the banks, idealists like me keep hoping for some kind of grand opportunity out of the chaos...nothing doing, there are just too many active control mechanisms and assests to draw on it seems to keep things as they are (thank you very much).

But the system is still flawed, so we are now caught in a dance of death between intervention and the underlying imbalances which subsequently re-emerge only to be stifled again by another wave of intervention in some kind of turbo charged 1930's replay.

The numbers on bonds and stocks and currencies keep going up and down, but employment just keeps going steadily up throughout this and noboddy starves or gets too upset because...well the system can support their basic physical needs thanks to petroleum and technology (plus afew other stuff). Poverty in the developed world is no longer about food, it is about poverty of life experience.

Result is a slow burn unresolvable crisis as people dont get really upset until they are starving.

Speaking of which right on cue is the call to the kitchen!!

Welcome back Paul - we've missed you.

As usual, right on the money!

Questions for us to ponder:

1. why are so many forecasters still seeing growth in the UK economy rather than predicting it will go off a cliff when a trillion pounds of aggregate demand is taken out of the economy through tax rises and spending cuts? (Ie amount cut times circulation @ 10 times spend value.)

2. ConDem strategy relies on 2m+ new private sector jobs, £3-400 Bn investment and export growth of 1/3 - there are a few new jobs, but nowhere near enough and they are part time/seasonal/marginal - investment is markedly down - exports are down and imports are up; given that ALL the indicators are now pointing in the opposite direction, surely even wet Tories will begin to run scared of massive spending cuts?

3. Only Darling's programme of bringing forward capital works giving "8% growth" in the construction sector last qtr. stopped us going into recession - I'd suspect a high proportion of spending cuts in the autumn statement will be capital items - so are we heading for 500,000 more building workers on the dole next year? Plus the end of olympic one-off building programme = another 50-100,000 jobs gone?

4. Housing - new starts dried up - collapse in new mortgage lending and av. age of first time buyers is now 35 - av. house losing £150 per day - with a rapid rise in unemployment and many older redudant workers trying to downsize and realise capital, looks like a perfect storm for a price meltdown. Given the state of the pension returns, many will have been counting on downsizing to fund their retirement: what happens if there is the 40% fall the OECD has predicted - or worse?

5. Confidence - consumers have come out again recently - index up - but what will happen with the autumn statement? The bad news is going to be very bad indeed if we are to believe the figures being suggested - I'd say that there will be a strong negative rebound and a battening down of the hatches all round and a collapse in high street spending this Christmas, leading to a big shakeout of retail employment in Feb/March.

6. As tax take delines in the new year and the cost of unemployment rockets, the PSBR forecast from the OBR will begin to predict govt. borrowing rising sharply - a bit ironic, in effect the OBR will be biting the hand that fed it! As the whole strategy is intended to reduce borrowing, at what point will there have to be a complete rethink - and what other levers are there left to pull?

TRADE is the elephant in the room - particularly the rigged Chinese currency and virtual slave labour labour market operated there by multinationals in cahoots with the Chinese Communist Party. By slapping on import tarriffs and devaluing our currency, our terms of trade could be rebalanced to make it uneconomic to import and viable to manufacture in the UK again. New jobs are created - the balance of payments is improved, tax take rises and the unemployment bill falls.

Simple - but this would be heresy to the libertarians who control the ConDem government - Tories and LibDem - who seem to think we can export our way out of the recession and debt - this isn't going to happen - so import substitution is the only option, or a massive contraction in UK PLC with the fall in living standards this will cause.

Forget BrokeBack Mountain - think Peter Pan, when the character of Peter reaches out to the children in the audience and pleads with them to save Tinkerbell by having blind faith in the supernatural and join him in chanting:

"I do believe in faeries, I do, I do!"
"I do believe in faeries, I do, I do!"
"I do believe in faeries, I do, I do!"

I afraid I don't - but I find the crocodile that has swallowed a clock to be much more believeable - and its a much better metaphor for the coming economic crisis, don't you think?

Cameron as Peter Pan - LibDems as the lost boys - public sector as the wicked Hook and the pirates - its all there. Did you know that the Wizard of Oz was written as a metaphor for Depression USA - witches are the banks, organised labor the cowardly lion, tin man the managers, etc?

nothing can happen globally without reform of chinese currency that is leaching jobs and investment away from those who let their currencies float.

given raw material costs are the same for everyone around the world there is no reason why its cheaper to bring heavy steel from china to uk except currency manipulation and ignoring human rights, environmental and health and safety standards and international copyright law. Such are the actions of a pirate state that has more in common with somali gangs than with western civilisation.

China is, like a pedlar of opium hoping the weak minded smoke them, peddling excuses and so extend the length of time the western money flows to their end of the table.

by ruthless design we have been and are being, in a negative national spiral, impoverished.

the uk govt has no society building science.

15
...in the case of China, it controls its population so that it keeps producing more and more able people, so not only does it make the best use of its labour, but it skilfully manages it and thus its economy too..

china is not a model to be copied. it is like saying drug dealers are successful so lets copy their model. which is a model of criminality.rather we should exact from them lawful trade with a floating currency.

currently china operates outside the laws of civilisation. so of course it is 'successful' in extracting wealth and so impoverishing us. china is the model of the bandit.

128. At 10:39pm on 30 Aug 2010, tabblenabble01 wrote:

126. At 7:47pm on 30 Aug 2010, stanilic wrote:

"There is nothing quite like self-delusion. It is, well, self deluded!"

In addition, do a search for a paper entitled "Rational Choice Theory Necessary but Not Sufficient", and read the end especially, as it should surprise some, as it's completely at odds with what hit the press four years later, just after the author died.

---------------------------------

"Rational choice theory adequately describes distributed
choice in those situations in which the distributed
nature of the choice is immaterial in the sense that the
returns do not depend on the frequency of sampling. In
many, though not all, other situations, it fares less well.
Nothing in rational choice theory can tell us when it fares
well and when it fails, but melioration does tell us. When
melioration implies utility maximization (i.e., maximum
reinforcement rate), rational choice theory adequately
describes behavior.

But describing behavior does not seem to be the
proper use for rational choice theory. Rational choice
theory tells us how choice should be allocated, given a
reinforcement or utility structure, not how it will be allocated.
This normative function it serves admirably and
usefully. A better analogy for rational choice theory than
Newtonian physics is Boolean algebra.
George Boole, a 19th-century English mathematician,
wrote his book ( 1854/1911) on the binary arithmetic
named after him as a description of human reasoning:
He titled it An Investigation of the Laws of Thought. It
turned out not to be much of a theory of human thought,
but as a calculus of reasoning, the book was epochal.
Instead of discovering the laws of thought, Boole had invented
the algebra embodied in all modern digital computers,
analgebra uniquely well suited to the behavior of
a network of binary switching elements. One reason we
find computers helpful is that our thought processes are
often not Boolean. In just that way, we need rational
choice theory because, as meliorizers, we often act suboptimally.
How a meliorizer can make use of the guidance
provided by rational choice theory is a complex matter,
far from well worked out and beyond the scope of this
essay (some sketchy notions are presented in Herrnstein,
1988, 1989).
Rational choice theory lies at the heart of not only
modern microeconomic theory but also political doctrines
that advocate minimal government--libertarianism and
anarchism, for example. The idea is that, insofar as people
behave rationally, they should be left to their own devices,
except when collective behavior undermines individual
interest, as when maximizing fishers overfish the waters
or each individual decides that someone else should do
a particular job, like serve in the army or build a road.
But suppose people fundamentally and individually misbehave,
as the evidence indicates they do. Then we would
expect government to take account, not just of the defects
of collective action, but of individual action as well, as
David Hume (1777/1826) said more than 200 hundred
years ago. As old as it is, the idea remains unexplored
and revolutionary, and it defines a conceptual frontier
that students of the experimental analysis of behavior are
uniquely well qualified to cross."

---------------------------------------

I'm not sure of the point that Hume is making....please clarify.

#14 tn01

In fear of sounding too sycophantic...but yet another another great post!

Why don't the others get it?

Is it IQ related? Many who post on here 'seem' intelligent...but is it merely masked by verbal fluency (in posts on here) making them appear smart?

As has been previously noted on here, most of the Chinese ruling hierarchy have formal engineering education backgrounds and have held real jobs before assuming powerful government positions.

Surely this needs further analysis.

#20

Crikey that is a long winded way of saying 'people are irrational, maybe we would have better governance if we took that into account''.

I dont know these academic types... why use a single sentence when 50 will do including adjectives which most normal people will never have heard of.


Same principal applies to professional economists by the way..

There is a human aspect to this discussion that is largely missing from this blog. If the dire consequences being written about actually do happen, will enough individuals do more than protest peacefully? The way out of the poll tax riots was comparatively simple, reverse the policy and get rid of the tax. Could there be civil unrest as a result of current policies? I hope not, but sadly can see that it could happen. But what would the policy alternative be to the large scale austerity measures and could they be implemented to benefit UK citizens without flouting EU or other international law?

The UK approach is that as we are in debt, our solution is to reduce the GDP of the country so we have fewer resources to use and deploy to pay our debts. My view – madness. Mainstream economic theory has got us into this mess and it is illogical to expect it to get us out quickly and with a minimum of pain. Mainstream economic theory is flawed. We need to use different ideas. At least we need to sack all who have used mainstream economic ideas over the last 5-10 years getting us into this mess. Would you continue to use an engineer who was incompetent? So why do we use economists whose record shows they don't understand their subject? Having failed to predict the problem, they are now 'surprised' by what is happening – anyone who falls into this description should be removed to the old folks home and replaced by those who do understand money flows and the way economies actually work

The FT recently had an article about how luxury good sales are booming but the stuff that the rest of us buy is slowing to a halt.

Seems the New World Order is well on the way to completion - the ordinary folk have handed over hundreds of billions to a small self-serving elite and not a single guillotine has been sharpened, not one rotten tomato has been thrown and only one ponzi banker has been sacrificed.

Not bad for daylight global robbery.

21. At 10:18pm on 31 Aug 2010

Read more carefully and learn.

Revolution...NOW!

21. At 10:18pm on 31 Aug 2010, DebtJuggler wrote:

As to Hume in 20, see page 359, footnote 3 of the article. It refers to the non linear nature of temporal discounting. The article expands on this, and I suggest that those in financial services egregiously exploited this with ARMs (Adjustable Rate Mortgages) and other 'financial instruments' which was hidden by making out that everyone is
(equally) rational. This suited their disreputable purposes. There is a lot of this about. It exploits human vanity. It is sold as equality and human rights.

As to people not getting it, that's THE big issue. It isn't a simple function of individual differences in intelligence either, as it seems that we are all prone to this in one form or another. Some of us are no doubt more vulnerable than others though.

Jauntycyclist - I suggest you REALLY don't understand what is being said here. China is socialist. If things get worse economically, you will come to see why I make a point of this, as if I'm correct, things have become as they have through people being actively misled. There is no nation building here because the political agenda is explicitly the opposite, i.e to free people from the state.

Jericoa - the trick is to appreciate that there may be a fault with oneself when something puzzles one - not to fault the source of one's consternation. How one gets people to do this is the hard part of good teaching (I think it comes down to selection). All I can suggest is that you read the 12 page article if interested and look into the matter a little further, as it covers gambling, drug addiction, alcoholism and much more in behaviour.

#27

ok

People are irrational in a broadly predictable way.

Will that do?

Again nothing new here as far as I am concerned, all this stuff is as old as the hills (of Athens and elsewhere), just re-cycled inherent truths about human nature.

Things seem to get unecesarily complicated when people want to make money out of it be it academics or currency traders (see Robert Pestons latest blog).

I see stagnation everywhere, and as we know nasty things have a habit of developing in stagnent waters.

Birds of a feather...

Tony Blair 'backs coalition over economy'
https://www.telegraph.co.uk/news/newstopics/politics/tony-blair/7975231/Tony-Blair-backs-coalition-over-economy.html

"If governments don’t tackle deficits, the bill is footed by taxpayers, who fear that big deficits mean big taxes, both of which reduce confidence, investment and purchasing power," Mr Blair wrote.

"We should have taken a New Labour way out of the economic crisis: kept direct taxes competitive, had a gradual rise in VAT and other indirect taxes to close the deficit, and used the crisis to push further and faster on reform."

---------------------------------------------------

As free as bird... or is it as free as a free-market anarchist?

"Then of course there are China and India, announcing growth rates of 10.3% and 8.8% respectively. Both economies responded to stimulus well but in addition to the usual demographic and social caveats I will point out that China's inflation rate is around 3.5% while India's at 10% means its inflation-adjusted growth rate is, er, not quite so impressive."


China and India's GDP growth has surely already been adjusted for inflation before publication. GDP growth is the increase in value added multiplied by the GDP deflator i.e. inflation.
Inflation makes a difference to the nominal not actual GDP increase.
So for example regarding the UK, if growth is say 2.5% this year and inflation 3% nominal GDP growth will be 5.5% (actual GDP growth 2.5%). If borrowing is say 9% then the increase in debt/GDP is only 3.5%, as debt is counted in nominal not actual pounds.
And of course this leaves out the massive amounts accruing to the treasury from the nationalised banks. According to a report in the Banker Magazine on conservative estimates £27bn so far or around 2% of GDP.
It transpires that the lack of cash claimed by the authorities is nothing of the kind, but rather the political excuse for the cuts programme.

A Marxist overview:

Rate of Profit is a function of:
the rate of surplus value,
the organic composition of capital,
the ratio of unproductive labour to productive labour
(& the turnover time of capital which will vary during the business cycle).

The rate of surplus value is surplus value divided by variable capital.
Also know as the rate of exploitation - how much the labourer produces that goes to the capitalist (s) relative to the amount he gets paid (v).
The rate of surplus value is a function principally of productivity & real wages.

The organic composition of capital is constant capital (amount of labour effort that goes on raw materials, replacement means of production [machines, buildings, etc], & investment in new means of production [proportion of s reinvested]) divided by variable capital.
As well as being a function of new investment, it is also affected by productivity & real wages.

The ratio of unproductive to productive labour relates to the distinction between labour that doesn't add any value in production to that that does.
Unproductive labour is labour involved in the circulation of capital or its supervision.
Productive labour produces cars for sales, unproductive managers supervise the workforce, unproductive circualtion labour (car salesmen) sell the cars.

The economist Fred Moseley has produced evidence that unproductive labour in the US has increased significantly in the post-war period & is the main reason for the fall in profitability - not the composition of capital.

What will happen to the rate of surplus value in the next few years?
Mass unemployment will probably help push real wages even lower, increasing the rate of surplus value & profit.
But the days of cheap energy are gone & maybe productive labour is becoming less productive, decreasing the rate of surplus value & profit.

Lower real wages increases the organic composition of capital & reduces the rate of profit.
Reduced productivity decreases the composition & increases profit.
Also, new investment in a recession is less forthcoming decreasing the composition & counter-intuitively increasing profit.

Finance is a rather large part of unproductive capital.
Has it reached it's limits?
Quite possibly in terms of numbers employed & average wages.
Unproductive labour is, & will continue to be under attack, to restore profitability.

If you are a worker the distinction between productive & unproductive labour is irrelevant.
If your wages are being reduced or you lose your job you are going to be less happy with the system.

Increasing numbers are disaffected no matter what politicans or journalists tell us.

The system is in crisis.

31. At 3:31pm on 02 Sep 2010, duvinrouge
--------------------------------------
As the powerhouses of the productive economy have become larger and larger corporations the amount of non productive accountants, strategists and multiple levels of management have grown in proportion far more than they could have done.
This is partly due to hordes of MBA entrants and the like taking over the running of manufacturing at the expense of shop floor experience of engineers and craftsmen taking the slow route up through smaller organisations.
Pure "management" probably does have a small place in the world but has in fact become self perpetuating as a growing empire of its own therefore acting as a leech.

I wonder if Mr Mason would like to comment on the NUJ overwhelming vote for a walk-out over proposed changes to BBC journalist's unsustainable pensions.

I imagine this was a tricky voting issue for journalists involved in reporting the economy in an unbiased way...

To be honest I dont know what BBC pensions look like, but I imagine they are a similar gold plated beast totally unavailable anywhere except in the ranks of the privelidged elite supported directly by the hapless ' hard working families and small business' types, irrespective of whether it is fair or whether the nation can support them or not.

Any view on this :)


Should I be throwing imaginery rotten tomatoes at the screen every time I see a BBC journalist reporting on the unfair nature of public sector pensions or commenting on private sector pension deficits or the private sector emerging 'pension poor' ?

#27 tn01

Thanks for that, I have read and understood the text...and it certainly does explain the wholesale take up of ARM mortgages by the unsuspecting population affected by this ruse in the US.

Has ANYONE read ANY media coverage of how the stalling liberal economies are going to return to growth? There's nothing by any of the BBC business/finance/economics journalists to the best of my knowledge. It doesn't matter how many times one asks this question, it is never answered or addressed by a journalist. Shouldn't the press be challenging politicians on precisely this issue instead of just letting them focus on CUTS to public services?

Has the long term Libertarian Con-Them strategy just been one where The Red Team takes taxes from those who naively indebted themselves ('built the economy') in the so called boom period in order for their masters to salt it away in the Public Sector, just so The Blue Team could come along when it had swollen up like a great blood sack to pump it all out again for the benefit of the same predatory oligarchy?

Is that what 'swinging both ways' really refers to?

Paul, it would be good if you could get the BBC to agree to resource a series where you interviewed Chinese administrators over in China, asking them how they deal with local community/economic issues etc, and possibly, what they think of the direction which the liberal-economies have been travelling etc.

What do you think, Paul, if I may call you by your first name:

'housey'

WITCHES, ANGELS, MONSTERS & CRIMINALS

I shall write to Mr Mason and ask him whether the abusers of the most fundamental human and civil rights are good for the economy are good for the economy.

Monika

networks are coming into existence where all on them are "Peers". There are fewer hierarchies, and everyone expects to speak their opinions.

IRL these networks are called equal-share cooperatives, and empower the individuals within them as they are all peers, and they all have the right to speak and take part in decisions.

cooperatives also reduces the spread of incomes, considerably raising the living standards of most people working, which has benefits across the board - especially if it is now economical to produce goods locally/Nationally.

cooperatives extend democracy to the workplace, and drive economic growth - and bring social justice and equality.


Paul: "In the Great Depression, the political sequence was that freemarket economics disgraced itself in the first phase, provoking a deeper collapse than necessary, and then Keynesianism emerged (or local variants of it), using fiscal, monetary and trade policy to escape the collapse. This time around Keynesian pragmatism was in charge at the start and is being succeeded in many places now by more orthodox, even neo-liberal policymakers. It's too soon to tell how that will shape things, but somwhere between the British general election and the US midterms history will note it became a tangible and dominant trend."


most of the rest of your piece was excellent, but i have to edit this.

"In the Great Depression, the political sequence was that Corporate Economics disgraced itself in the first phase, provoking a deeper collapse than necessary, and then Keynesianism emerged (or local variants of it), using fiscal, monetary and trade policy to escape the collapse. This was aided greatly by some Corporations like Ford paying higher wages, enabling the consumption boom that drove the recovery. This time around Keynesian sound-bites were in charge from the start, being succeeded in many places now by the classic revolutionary slogans of neo-liberal policymakers. In the Real World, all that has happened is the ultra-wealthy got handed the entire UK Treasury without even promising ever to pay us back - and then charge us interest on that debt. And now services to the People must be cut because we owe the banks too much money, the rich are refusing to pay their taxes, and our Govt wants to reduce Corporation Tax for the large multi-nationals that have sucked local economies dry. It's too soon to tell how that will shape things, but somewhere between the British general election and the US midterms history will note it became a tangible and dominant trend."

fixed.

RE DEBT: LOAN SHARKS ARE NOW OPENLY ADVERTISING ON TV!

I have just watched a TV commercial on Channel 5 by a company called 'WONGA.COM' advertising loans with a 'TYPICAL APR OF 2689%'

(aired during the adverts of the programme 'The Wright Stuff'...now who just might be the target audience for that show?)

Don't believe it?....check out their website for yourself...


This is just pure and evil usury.

After all that has happened, have we learned nothing? [Unsuitable/Broken URL removed by Moderator]

#31 DV

"Fred Moseley has produced evidence that unproductive labour in the US has increased significantly in the post-war period & is the main reason for the fall in profitability - not the composition of capital."

Though I do not doubt the point about unproductive labour, do you not think that there is still a huge part to be played by the cost of capital maintenance, which itself contributes to decreasing productivity?

John Michael Greer makes this point using a framework that tries to give an analytic framework to Tainter's diminishing returns to complexity argument:

As link is a pdf, then Google: john michael greer catabolic

"the collapse of the western Roman Empire could be seen as a succession process in which one seral stage, dominated by a single sociopolitical 'species' that maximized capital production at the cost of inefficiency, was replaced by a more diverse community of societies, consisting of many less populous 'species' better adapted to their own local conditions, and producing capital at lower but more sustainable rates.
Any society that displays broad increases in most measures of capital production coupled with signs of serious depletion of key resources, in particular, may be considered a potential candidate for catabolic collapse."

This comment was removed because the moderators found it broke the house rules. Explain.

14. At 7:06pm on 31 Aug 2010, tabblenabble01 wrote:

'What's wrong is that China uses its state run industries to support growth of its state (infrastructure) and that's in support of its people, whilst right-wing neo-liberal (anarchistic) economies )West and Japan etc) privatise profit and strip their public sectors assets, with absolutely no national loyalty whatsoever anymore. Many of the big business owners are non doms, i.e internationalists or cosmopolitans.'

----------------------------------

HSBC threatens to move headquarters away from London
https://www.bbc.co.uk/news/business-11174953

HSBC may move from London if the UK government decides to break up big banks, a senior executive has said.
Stuart Gulliver, head of the Canary Wharf-based bank's investment banking division, made the warning at a banking conference.
He said he was "genuinely concerned" that the UK's banking commission would recommend splitting up banks.

we need to build fresh financial instruments, mutual societies/saving banks, and let the big banks fail, as they inevitably will do wih the continued use of casinomics.

of COURSE the big banks have no loyalty to the UK - if they HAD of done, they wouldn't have deliberately created this mess.


#39: in other words, economies fail when wealth/power becomes too concentrated, as that perverts the market mechanisms, making an economy inefficient. When that is also resting upon the use of a limited resource that is running out... such as oil... or the natural biosphere itself, then a very serious clock is ticking.


could the entire Western economy be facing an 'Easter Island' future, unless we dramatically change course?

In summary for the 'developed' (HA!) world.

2008 - financial crisis begins - unemployment rises sharply.

Interest rates slashed - unemployment rises, incomes stay static, real living standards and pensions eroded with inflation steady at 4% ish


QE programme implemented - unemployment rises incomes stay static real living standards and pensions eroded with inflation steady at 4% ish


Stock market recovers - unemployment rises incomes stay static real living standards and pensions eroded with inflation steady at 4% ish

Economies come out of reccession - Unemployment flattens out falls for a short period but not significantly incomes stay static real living standards and pensions eroded with inflation steady at 4% ish


2010 - Economic recovery falters - unemployment rises incomes stay static, real living standards and pensions eroded with inflation steady at 4% ish

Is it just me or is there a pattern emerging here? And more to the point,why doesent anyone talk about it in the simple understandable terms as above in the media?

All the mechanisms to support the current economic system are doing nothing for the people it is supposed to serve and everything for those whom benefit most from its continuation.

It is so simple.

#39 Hawkeye_Pierce

You can be relied upon to make worthwhile contributions.

The ecological crisis in the form of depletion of non-renewable resources & destruction of renewable resources would affect variable & constant capital (v & c) in Marxist terminology.
More labour time would be needed for v & c leaving less for s (surplus value) & hence putting downward pressure of profits.

The actual fall in use-value (collapse of civilisation) would not be directly captured in exchange-value (c, v & s) unless of course total actual labour time falls (millions killed in war, disease, starvation).

Everything seems to be turning against the rate of profit & so the capitalist system.

#jericoa: yes.

the internet is a wonderful beast for peer-information-transfer, is it not? TV is still stuck in the hierarchical model of information-dissemination.

the UK State has recently passed legislation giving the State vast powers to enforce against 'file-sharing', and has made news about that unmentionable on TV, apparently - what's to betting the Chinese style control of discussion is intended to follow afterwards?

economics is easy, once you have the basics and a questioning mind. That is why economics is made so complex, and why it is one of the most 'controlled' disciplines - very hard to get peer-review if you don't agree with the line taken by 'the Economist', or the 'Washington Consensus' bunch.

the last thing our rulers want is for the general Public to be able to decode the casinomics spewed out as serious analysis.

#45 How true! Another enlightened fellow on here, please stick around and tell your friends.

On a similar theme to your post I meant to add a couple of paragraphs to my last offering on the real global economy and emerging dynamic but ran out of lunchtime. It went something like.

''As a chartered professional highly numerate engineer trained and experienced in practising disciplined and unleveraged analytical thought processes in order to ensure systems remain predictable in dynamic environments, fit for purpose and with a high factor of safety against catastrophic collapse, I am of course, hopelessly un-qualified to comment on such things as the global economy its functioning its stability, management and fitness for purpose as a model.

If you want a proper analysis of the situation to be broadcast to the masses clearly the BBC / Sky / Times etc feel they must interview an economics expert from Govenment, one of the banks or one of the ratings agencies on news at 10 etc, who given their track record, clearly understand these things better than me and have our best interests at heart''

Dont they?

I feel a 1.5 bottle of wine evening may be on the cards, for which, I will apologise for in advance in anticipation of future Jericoa rantings on here this evening.

Have a nice weekend all.

yes but what about your summer hols paul? welcome back to blogland!!! looking forward to yet more fantastic analyses this autumn.

45. At 2:37pm on 03 Sep 2010, Mindys_Housemate wrote:

"economics is easy, once you have the basics and a questioning mind.
That is why economics is made so complex, and why it is one of the most 'controlled' disciplines - very hard to get peer-review if you don't agree with the line taken by 'the Economist', or the 'Washington Consensus' bunch.

the last thing our rulers want is for the general Public to be able to decode the casinomics spewed out as serious analysis."


But where ARE these rulers? After all, we can all see the legislation
being drafted and enacted in Parliament as all of that's "open and
transparent" these days. What isn't obvious to ALL is how that
legislation works to some people's advantage literally at the expense of
those who can't really understand how and why it's written. That means
that there's a class of people which is able to make good use of the law
to their advantage and a much larger class which isn't.

That, I suggest is because of diversity, but THAT'S being masterfully
spun as equalitarianism! This, if you think about it is the very
opposite of diversity, and THAT'S being done because diversity demands
regulation, i.e a socialist state - Big Government to protect those who
are vulnerable, from those who exploit the vulnerable, and that I
suspect, is why some unpopular Middle Eastern states, use words like
Satanic to describe our systems of government.

This comment was removed because the moderators found it broke the house rules. Explain.

A few economy headlines from the bbc.

''New UK data shows a surprise decline in new construction orders and a sharp slowdown in the services sector.''

Why is this surprising? Gives the implession of an unexpected blip, it is nothing of the sort and it was entirely predictable!!


Here is another one on the latest US unemployment figures....

''Second-quarter growth figures were revised down last week to an annualised rate of 1.6%, considerably less than many leading European economies.

The housing market has also slowed sharply in the past two months.

But analysts said that the latest jobs numbers would go some way to calming fears that the US economy could be heading back to recession.''

Which analysts said that BBC? Are you too ashamed to mention the sources? Perhaps it was S&P or moodys, those esteemed and highly reputable credit rating agaencies who gave cobbled togther sub-prime junk AAA rating?


Is this called balanced reporting in the public interest?


Perhaps BBC journalists are too concerned about losing thier unsustainable license payer funded pensions to do their jobs properly.

''BBC staff members have voted in favour of strike action in a dispute over pensions.

Bectu and the National Union of Journalists said more than 90% of members had voted for a walk out......The unions have promised a "concerted campaign of industrial action" if agreement is not reached.....The corporation said the changes were essential to tackle the ballooning deficit in the pension scheme, which stood at £470m two years ago''

...that would not be a license fee payer funded final salary pension scheme by any chance would it???

This article was nicely buried by journalists under the 'news, entertainment and arts section and disappeared off the main news page very quickly..

https://www.bbc.co.uk/news/entertainment-arts-11154303

Intriguing article in the New York Times about the US housing bubble and the vast sums that first Bush, and now Obama, have used trying to prop up the US housing market - all wasted.

(Alas, Gordon Brown, more or less, did the same.)

The penny seems to be finally dropping in the US that trying to protect the ludicrous asking prices - US house prices have already fallen 50% but are still simply too high - is rewarding the feckless and greedy whilst punishing the generations yet to get on the housing ladder.

Now, there are growing voices in the US to let those who drove the housing bubble in recent years to crash and burn - stop using tax-payers' money to protect people with huge mortgage debt.

Trying to support them is a major factor in holding the US economy in the doldrums. Cast them off and, so the theory goes, a new generation will be able to buy houses once house prices are affordable - and these new buyers will then help to drive and rebuild the economy.

In other words, as simple as it can be, trying to prop up house prices is actually causing far wider negative damage to the US economy.

I suppose it is too much for our ConDems politicians to read this and undestand it?

Here in the UK Brown did everything possible to prop up the housing bubble but this has merely resulted in the next generation of potential house buyers to be priced out. Will commonsense prevail here and the British lovers of property porn, of liar loans and magnolia paint be sacrificed for the greater good of the British economy?

Housing Woes Bring New Cry: Let Market Fall

https://www.nytimes.com/2010/09/06/business/economy/06housing.html?_r=2&ref=business

During the day, the BBC still screens lots of 'property porn'
programmes. These are quite telling. One often sees some enterprising persons buying up properties, doing them up, often converting tem into 'rooms' to let out, at a tidy profit. Estate agent come in, value the property higher than the purchase price, and everyone is happy.

Questions: At a time when birth rates are well below replacement level, and any population growth tends to be in those groups who are relatively low skilled, who is renting these properties and what are they doing for a living? In one news item one sees celebration of yet another year of outstanding results (75% of biology GCSE's are a B grade or above and 99% of GCSE's are passed) so grading is not, 'Normal' anymore, and in another we here of Mickey-Mouse degrees and even from one BBC NEWS anchor, 'what's wrong with them if people enjoy them'?

Costume jewellery - what's it worth? What's it for? So long as people never ask, it doesn't matter ,I guess.

#51, Tawse:


" gnuneo
27 June 2008 at 19:42

one possible fix for the mess:

double council tax on residential properties where the owner owns more than 2. Quadruple it for those who own 4. Octuple it for those who own 5.

the resulting scramble to offload property by land rentiers will drive the housing market down as fast as blair went down on bush.

whilst this will have severe short-term repercussions, it will have the effect of rapidly making available cheaper housing for those who wish to purchase, and will restabilise the UK housing market in the shortest possible time - and don't delude ourselves, the market will continue to fall until the cost of housing matches people's incomes again anyway.

to shelter those who are in negative equity (and that will increase dramatically soon), set up a mutual society backed with govt funds, and then advise people to claim bankruptcy, dropping their mortgage.

let the mutual society then purchase the homes at the vastly reduced market rate, and offer a stable, reliable and non-international-market-reliant morgage for the former owners, legislation can quickly be passed to prevent rapid eviction to allow this to happen.

the UK will come out of this with a *higher* level of home ownership, a ridiculously stable point-of-centre mortgage lender, and people once again able to afford housing, on what for most are stagnating or falling real incomes.

the ones who lose will be the ultra-wealthy who own banks, the rentier class who own far too much of the UK housing market, and the international financiers who will not be able to bleed off our internal mortgage providers anymore.

higher home ownership, stable mortgages, and a rationally priced housing market - but our political masters would have to annoy those who will pay them their various retirement packages and bonuses.

the People and sanity v the Ultra-wealthy and an irrational market that will drive us into severe depression if left festering long enough - why do i suspect that once again the People will be left to pay the price?

oh yes, based upon former experience.

this crisis has been coming for well over a decade, and has been warned about almost as long, yet our political masters allowed it to continue. This is not a surprise to them, although it *seems* unplanned for - this is certainly an absolute failure of our political and economic leaders, who seem only to want power given to them so they can line their own nests, instead of doing for the British People their absolute best.

and the revolting thing is, if we get rid of the current lot of power-hungry narcissistic toadies, the likliehood is we will simply get another of the same, possible worse, under the blue banner.

are these [bleep] *trying* to foment revolution in the UK??? Or are they just incapable of actual leadership and problem solving?"


https://www.newstatesman.com/economy/2008/06/house-prices-housing-british
"

----------

noticeable that most of these housing/credit bubble "solutions" nearly always end with the money ending up with the people who already have too much.

53. At 2:57pm on 06 Sep 2010, Mindys_Housemate

Stealthily seducing one large, overly trusting, (not too smart?) group into debt, then driving down the value of their assets so that another (smaller/'smarter') group can buy up those assets at rock bottom prices before selling or loaning them back out again to the first group, is an example of classic inter-group human predation, which has caused centuries of conflict across the world, and here, I suggest, you are tacitly endorsing it, and probably because you don't see how it ever happens.

That's faux-equalitarianism. That's caveat emptor.

I suggest you need to think very carefully about the nature of diversity and about how it abuses freedom.

This comment was removed because the moderators found it broke the house rules. Explain.

The politics in the US is interesting.

The US has a deep rooted belief in 'freedom' & 'democracy'.
But these concepts seem to take on contradictory political roles.

It's a bit like the 'terrority' versus 'statehood' debate in the film "Who Shot Liberty Valance".
Those who want to keep the terrority status see themselves as being for freedom & against the state interfering.
Whilst those who want statehood see the collection imposition of state laws through the democractic agreement of the people as the way of progress.

Of course, such political ideologies really reflect economic realities.
The cattle ranchers (effectively small businessmen) opened up the west by the rule of the gun.
But then big business wants order to be sure of returns on investment in railways etc.

Today big business controls the state more than ever.
The illusion of parliamentary democracy is slipping.

People the world over, not just in the US, want to take back power.

The sentiment of the tea party is more terrority minded.
Perhaps those of radical democrats more statehood minded.

Either way, the people are looking for a way to get back at big business.

#56

Big business, in cahoots with captured states, is the last hurrah of Accumulation by Dispossession:

https://en.wikipedia.org/wiki/Primitive_accumulation_of_capital

What Marx & Harvey overlook is that the main barrier to growth for Capitalism is it's primary resource requirement: energy (i.e. fossil fuels).

This interview with Nicole M Foss is very interesting at weaving together energy, the environment and economics / finance:

https://theautomaticearth.blogspot.com/

#57

The finincial crisis & peak oil are not unrelated.
Indeed, peak oil & the wider supply (ecological) crisis are the biggest threats to capitalism.
Yes, they place the biggest obstacle to growth.

Perhaps Riverside Cottage's Landshare scheme will enable some to survive better than others.

I'm intrigued by her (Nicole Foss) comment that, "credit is more than 95% of the money supply".

On this basis perhaps deflation is more of a risk than hyper-inflation.

#58 DVR

"perhaps deflation is more of a risk than hyper-inflation"

#57

Whoops!

"perhaps deflation is more of a risk than hyper-inflation"

Both achieve the same means by extinguishing debt (as in Fisher debt deflation). Classic deflation achieves this by preserving the integrity of money (brings the inflated assets back to normality), whereas hyper-inflation devalues the money (hence devalues the debt). I think that's right.

Hyman Minksy's "Stabilising an Unstable Economy" has a nice chart that shows how they are related. He also explains how the different outcomes are actually hovering on a knife edge.

Personally I don't think that the dollar can ever be reigned back in, it's been constantly watered down for more than 40 years.

https://gata.org/node/8303

hyper-inflation is far more likely.

we import most things (incl energy), and printing money causes devaluation. Although inflation might "fall", due to fall in demand when interest rates wise again, that is because normal people will not be able to afford basic items with their incomes.

that will be only "head-line" inflation - REAL inflation is going to go through the roof.


-especially in luxury items. Those at 'the top' are still getting their bloated bonuses, note.

Apologies H_P...only just saw this one...

https://www.bbc.co.uk/blogs/newsnight/fromthewebteam/2010/09/friday_3_september_2010.html

11. At 5:00pm on 03 Sep 2010, Hawkeye_Pierce wrote:
#5 DJ

'You are right on both counts. However, we also need to tackle "originate-to-distribute" loan creation. A Glass-Steagall style wall between institutions is pointless if your mortgage has been spliced across these two different types. Who really owns the asset? If the investment bank fails and they "owned" it, what would happen to your mortgage?

The complexity of modern banking only serves to obfuscate risk ownership. Let us not forget that banks do not inherently transform or reduce risk, they can only either absorb risk or transfer it. It is the originate-to-distribute model that opened the flood gates to massive risk transfer practices. Transfers that can conveniently dump responsibility for bad loans on to gullible counterparties (such as AIG, Fannie Mae and Freddie Mac), or ultimately the taxpayer (as Greece, Ireland and Iceland most alarmingly attest).'

-----------------------

I whole-heartedly agree.

I remember that you made this point several months ago on one of Paul's previous blogs and I recall that it was a very perceptive point to make. I think I even commented so.

I listened to Vince Cable on the Today programme on Radio 4 this morning and he was pressed on the very point of separating the 'casino' banks from the 'retail' banks...yet he appeared surprisingly (and disappointingly) non committal on this issue. I just wonder if he had in mind the very valid point that you make above.

This critical point MUST NOT be overlooked by the Commission on Banking that will report later in the autumn.
https://www.hm-treasury.gov.uk/press_11_10.htm

I personally believe that this practice was deliberate, planned and deviously malicious.

Others would say that 'the perpetrators' are predisposed to such activity.

I couldn't possibly comment.

U.S. Financial System Still "Fundamentally Corrupt," Kotlikoff Says: Here's How to Fix It [Aug 24, 2010]
https://finance.yahoo.com/tech-ticker/u.s.-financial-system-still-%22fundamentally-corrupt%22-kotlikoff-says-here%27s-how-to-fix-it-535361.html?tickers=XLF,FAZ,JPM,GS,BAC,C,WFC

#62

Thanks for responding. If you read Peter Warburton (link from #60), you can start to understand that the Gvt enthusiastically supports this activity:

"What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur."

I thoroughly recommend Warburton's book "Debt & Delusion" (2000).

I'm currently reading Michael Hudson's "Super Imperialism", and again the accusation is of a deliberate Gvt applied strategy to perpetuate liquidity. It is astounding how despite being the biggest debtor in the history of mankind, the USA is able to exert such financial influence.

No politician dare to tackle this "home truth" as it will bring the house of cards down.

#63

After Michael Hudson there's Loren Goldner & fictitious capital.

I still want to hear what plans the ConDems have to encourage the private sector.

Anyone heard anything?

#66

The pope is coming next week, I understand he has been asked to put in a good word for us.

Another R4 interview this morning that misses the elephant in the room.

There are not enough jobs!!!

What is the point in 'incentivising' people to look for or train for jobs which do not exist and are unlikely to exist in the future due to the global economic dynamic.

Nothing is happening. Lots of talk - nothing happening.

Talk of massive public sector job cuts but it is just talk. Anyone know one single public sector worker who has lost his or her job since the ConDems took power?

Just sick of them all, media politicians, think tanks (possible exception of NEF).

There are not enough jobs / can never be enough jobs again to go around in the way that has been the case for the last 60 years or so unless you want to destroy the planet with every family in the developing world owning a nice 2 up 2 down and a small car plus TV and meat on the table 7 days a week.... plenty of jobs then... but a trashed planet within 15 years probably and a lot of wars fighting over resources as well as they dry up. Does not sound too clever to me world 'leaders' (dont make me laugh).

Training people for jobs or forcing them to look for jobs that no longer exist as a direct result of the headlong rush towards ever more efficient and mechanised ways of making things we need and increasingly things we dont need is a futile and pointless distraction from the real underlying and increasingly very real issues which get naff all exposure in the BBC or anywhere else.


Getting rid of a load of the public sector will only make things worse as there are no jobs to replace them, the result of the spending (borrowing)splurge pre-election by labour can be seen directly below


https://www.bbc.co.uk/news/business-11243860


i.e. a record 3rd quarter Trade deficit (Am I getting this right shireblogger?), the only thing economic recovery is capable of doing in this country is to suck in more imports and imported inflation along with it neither of which stimulates the private sector noticeably (except retail)or generates any jobs for people to train for or to get out of bed in a morning to look for these phantom jobs.

politicians, media, BBC, think tanks, bankers, mainstream economists are utterly intellectually and morally pathetic the whole bally lot of you.

Not one of you ever has the guts to come on a real debating forum like this and put up an un-spun logically coherent and defendable argument against the dynamic I and others have tried to describe above for about the 1,000th time on these pages and elsewhere.

You are all a pathetic bunch of morally bankrupt cowards, hiding behind fake smiles and skillfully spun words which make the right sounds but have no substance, afraid to acknowledge let alone confront and look at ways to address these emerging challenges for the greater good.

I detest all those who practise the above in their daily interaction with the world.

Rant over.

Jericoa,

I've almost given up with the BBC, as shows like this on RT provide more insightful (inciteful!) debate on real economic issues:

https://www.youtube.com/watch?v=OhV_tGrecqc&feature=player_embedded

70. At 1:14pm on 10 Sep 2010, Jericoa wrote:

"I detest all those who practise the above in their daily interaction
with the world."

But.....have you really registered what the biggest change since the
1950s has been across the Liberal-Democracies?

Answer: It's the proportion of females in higher education and the
workplace.

Look into what they choose to do at GCE and at university, then look at
how the jobs have gone and why. Look at productivity, and remember, they
compete with males. They have destroyed productivity and
stability, without trying.

That's the great big elephant in the room. Aside from that, this has
skewed the birth-rate and thus the balance of skills in population. A
major demographic bomb.

#71

Watched the link,I guess the trouble is I was only number 9,000 who had watched it, it needs a couple of extra zeros before it starts to challenege the popular perception of the chemically and psychologically subdued masses.

#72

Yes, I can see aspects of that too, the female eunach principal ultimately and if taken to the extreme leads to everybody being a eunach, shortly followed by there being nobody at all!!

I dont know if you can put that 'jack' back in the box though, a better balance needs to be found, it has just overshot slightly and led to a lot of gender confusion.

I like being able to interact with women as equals but without living in denial about our psychological and biological differences which are hard wired anyway, it is the latter part that has 'gone wrong' in my opinion but it is in the process of being self corrected anyway. There are always exceptions but i think most women would prefer to perhaps work part time and look after the family as a good all round compromise and if they are strong enough to resist peer pressure to 'be a man' in its traditional perception.

"73. At 11:37am on 11 Sep 2010, Jericoa wrote:"

I'm glad we agree on that. One thing which I think is worth drawing attention to is that in China, which is proudly socialist (with Chinese characteristics)the gender balance in jobs is not equal at all and they don't have a problem with that. This tells me that the Liberal-Democratic obsession with gender equality in the workplace in recent decades is not left wing in origin, but right wing (anarchistic) in origin. I also have grave suspicions about the likes of freedom fighters like Noam Chomsky for the same reason. I suggest 'de-regulator' would be a far more appropriate label for his ilk. A generation has been misled I suggest. I agree it is very hard to see how this madness can be treated, or the jack put back in his box.