A health check for the UK

" The assessment of the impact of spending cuts will also have raised few eyebrows at Number 11. "Although fiscal consolidation will slow growth in the short run as demand is withdrawn, it is unlikely to derail the recovery and indeed could support growth in the long run."


Here we go again, the mythical recovery.
Last time I looked we have rising unemployment and negative growth and somehow this is unlikely to derail 'the recovery'

I'm fed up with being taken for a dumbkov.

There is no hiding just how irresponsible Labour was with the public finances. Money was thrown at problems and no care was taken to ensure it was well spent, resulting in better outcomes. This is across the Board.

Today we read that councils are planning to help first time buyers. Presumably these are the same councils cutting front line services. Sheer Folly and an inappropriate use of tax payer's money.

EconomicsStudent @1.

I take it you're not familiar with leading/lagging indicators then?

3. At 4:34pm on 16 Mar 2011, Marnip wrote:
I take it you're not familiar with leading/lagging indicators then?

Leading /Lagging indicators ?
Err No please enlighten me. I assume it explains how we really do have a recovery but no-one can actually experience it. Marvellous !

'Current land use planning policy is excessively restrictive, making supply unresponsive to demand and contributing to creating housing shortages and reducing affordability'

Demand? Is that actual demand or economic 'effective' demand. Or is it the demand to provide more houses that can only be bought up by private landlords and rented out.

Is that the 'demand' that comes from an ever increasing population, fuelled by immigration, which is all very nice becasue it drives down wages. Hum..doesn't that reduce 'effective' demand????

More claptrap to disguise ideological choices..the rich get richer and the poor get poorer.

When the nationalised banks are so broke they cannot lend, how are we ever going to get a recovery?
Budget deficit obsessionalism is the modern equivalent of the Gold Standard.
The drive to increase reserve to lending ratios in the banks a la Basel 11 is further constriction, as is any measure to make banks liquify the debts the government have guaranteed ....and any move to hastily remove these guarantees is also bonkers.
What I find interesting is how the Swiss banks, who bankrolled every speccy builder in Eastern Europe, have emerged strong, with an even stronger currency, despite huge wages and costs, a rising property market and no sign of them being labelled PIIGS.
The other factor about the public sector cuts that is not looked at is the efficiency of cuts......how much it costs to make a cut and the level of service offered by a government department pre-and post-cut.
Eg if a department makes a 10% cut, is the cut in services 10% or is it more like 50%?
In which case do cuts save money or do they waste more than they save?
Are they efficient or are they really wasteful? Is there a formula for this, an index?
How much are we spending on severance packages, written-off asset values, lost tax revenue, lost Vat, lost utility....eg carers having to give up work, builders going bust and and a reduced competitiveness of future tenderers as suppliers go to the wall,skill losses, opportunity costs,quality, reduced morale, lack of future planning.
If all you look at is the bottom line, you get a bum deal!

It would have been helpful if the OECD had been able to say by what mechanism their optimistic view of the British economy will be realised. The usual I suspect that in cutting public expenditure budgets magic dust is sprinkled down on the private sector which spring-like bursts into activity. Presumably they must think that everything in Greece is wonderful and thank goodness they do not subscribe to the view that Osborne does not have a growth strategy. The only growth strategy I can detect in the OECD report is that further 'efficiency savings' (AKA cuts) in the NHS is likely to lead to more growths of the malignant type!

4. At 4:42pm on 16 Mar 2011, EconomicsStudent wrote:

"Leading /Lagging indicators ?
Err No please enlighten me. I assume it explains how we really do have a recovery but no-one can actually experience it. Marvellous !"

I hope that was facetious given the name you've chosen for yourself. Did you see the manufacturing figures? Did you look at what categories of goods were driving those manufacturing figures? Leading indicators...

As for the recovery that no one is experiencing, yep, that's what lagging indicators are - ones that change after the point in the cycle they reference. Such as economic welfare.

Not sure how an economics student can ignore leading/lagging...fairly sure I first came across that in my first year of university.

In OECD speak 'ambitious' (see Stephanie's piece) means you are having a laugh. So the OECD is actually saying 'fat chance'!

More rubbish from the completely unelected neo liberal think-tank, the OECD. The same neo liberals who never saw the GFC coming because they were too obsessed with telling governments to spend less. The same neo liberals who thought that gilt yields would rise in response to the increasing budget deficit, when they actually fell.

And of course their neo liberal cousins the IMF who have never had any of their forecasts pan-out (which they wouldn't because Expansionary Fiscal Contraction' is not just an oxymoron, it is complete fiction!).

You can only consider this fiscal consolidation "necessary" if you believe in the mythical "Ricardian Equivalence", or "Money Multiplier".

Which banks / political institutions are providing these "economists" with revenue in exchange for pushing elected governments into serving narrow interests - we don't know because there is no obligation on them to tell us.

If the OECD's forecast is very wrong and the economy tanks, will any of them get the sack? will they even apologise and admit they were wrong?

Because of its desire to stay on the right side of governments the OECD is pretty much a poodle with its reports, but going from "necessary" to "substantial" about describing the spending cuts does tell us something has changed, whilst the telling phrase: "Channelling more resources to public investment would be warranted" also reveals a rethink on the straight tax increases/spending cuts approach.

A couple of other numbers: there is an underspend of £20 Bn on the expected increase in unemployment costs to HMG earlier in the year which can only be ascribed to Darling's stimulus package to keep 350,000 construction jobs, whilst UK Financial Investments now holds £86 Bn of bank assets for te taxpayer - a large back pocket wodge to set against the borrowing requirement this year that the last incoming Labour government didn't have to address a very similar level of public borrwing inherited from Ken Clarke's Tory chancellership.

A few dark clouds - the impending Euroland debt crisis will come to a head shortly according to Paul Mason'e excellent NewsNight blog which might lead to another UK banking crisis as well, whilst the oil price spike is profoundly worrying - as is the impact of the Japanese disaster on world trade and demand.

As the UK was beginning to be in recession again in Q4 2010 and the spending cuts are only just about to bite, plus there wil shortly be a huge slaughter of construction jobs as big projects, e.g. olympics come to an end and there is a sharp fall in other public sector work, the odds are unemployment will take off in Q2/3, whilst the impact of large oil & food price rises will squeeze consumers even further, so significantly increasing the risk of recession.

I suspect GO has already seen that simply hacking £110 Bn out of UK demand through tax hikes and spending cuts is VERY likely to cause a recession once the storms on the horizon really hit the UK economy, so it wouldn't suprise me in the least to hear about some "Channelling more resources to public investment would be warranted", as the OECD proposes.

There's the HST plan for a start - but I suspect there is another similar make-work programme lurking in the background that GO will reveal in the budget as a sop to those who recognise the huge danger of a deep, long lasting recession otherwise. I think some of this back pocket wodge of £106 Bn will be spent on some such programme, so placating nervous Tories and LibDem MPs, whilst thumbing his nose @ the Eds across the dispatch box.

A major programme to build new social housing?

Stranger things have happened...

Marnip,
Manufacturing is looking healthy, but it is only 13% of the economy, the service sector is 70%, and is not looking very healthy at all.

9. At 4:56pm on 16 Mar 2011, John_from_Hendon wrote:
In OECD speak 'ambitious' (see Stephanie's piece) means you are having a laugh. So the OECD is actually saying 'fat chance'!


It also said 'necessary'. Well ignored.

8. At 4:54pm on 16 Mar 2011, Marnip wrote:
Not sure how an economics student can ignore leading/lagging...fairly sure I first came across that in my first year of university


You are probably not aware of my views on current education standards, particularly in Economics, but nevermind.

OK Manufacturing. The Guardian I think reported it quite well.
https://www.guardian.co.uk/business/2011/mar/01/manufacturing-data-gdp-cips-markit
So this is a leading indicator I guess in your eyes of a recovery. I think you might find many who don't agree.

Look. If you want to believe you are in the middle of a recovery, that's fine. Nobody can persuade you otherwise because you will just pull the leading /lagging nonsense until the next set of stats. I don't know what part of the country you live in but get out there and start talking to real people and try and get a feel for what is really going on.

But the report reserves its sharpest language for the state of the UK housing market - and the planning regime. Here the OECD ...
..................................


Let them all build in the back yard of the OECD! We don't want our greenspace building on so that we can have more and more immigrants - with 800,000 empty properties in the UK!

OECD should keep to numbers and leave the UK environment to the people of Britain ... MYOB

#8 Marnip,

You appear to be guilty of the same type of myopic thinking the you accuse Economics Student of. When you look at manufacturing performance (in terms of both output, productivity and profitability) over the medium tern (5-7 years) then a very different view of manufacturing performance appears.

In terms of the UK economy then you also have to take note of Charles Jurcich's point in #12.

I think that as time goes by these various economic bodies are bringing themselves into dispute. They rush for a consensus in their highly paid jobs and do not get a lot right. Also I read a critique earlier of the use of GDP as an economic measure referring to what is going on in Japan by the economist Shaun Richards

"Ordinarily we use estimates of Gross Domestic Product (GDP) but it does have flaws. Consider this. We have seen a lot of destruction in Japan due to the earthquake and tsunami but this is not recorded as a loss of economic output whereas when such buildings are replaced we see a positive contribution to economic growth as measured by GDP. If you are currently homeless until a new one is built you may wonder as to why there is no measure of your loss and to my mind you would be right. I doubt if anybody will ask if you prefer the new home."
https://t.co/1J3R51f

I think that he has a point we need some new ways rather than the same old ones like the OECD that seem to have forgotten how recently they failed us!

And after yesterdays column extolling the need for innovation to create growth we have today.. another 500 R&D jobs to go. This time from Novartis to add to the 2,500 losses announced last month by Pfizer.

Replacing jobs like those is certainly going to need some creative thinking.

Governments this last 50 years haven't had a clue as to how to create an environment attractive to companies like these to keep high tech jobs here in the UK.

Sorry BBC, but I have just heard Hugh Pym describe the OECD as "a respected economic think-tank". Have the BBC done a survey to see who, if anyone, respects them. I would prefer he use terms like "the OECD, a think-tank highly respected by the current government", as this would be accurate, given that this government keeps quoting them.

Second, note that the OECD produced the contraversial Jobs Report, which they ended up having to recant a few years later. The belief they peddled, that unemployment is largely voluntary, is still polluting legitimate debate today.

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

If the OECD is really interested in "healthy economies", it should pay attention to the evidence on social welfare spending vs economic growth and its relationship to mortality. Recent work across OECD countries on this has shown that a given increase in social welfare spending is 7x as powerful as a given increase in GDP in its effects on mortality. Of course, things are complicated in that private sector growth provides the pot from which social welfare spending comes. But if Andrew Lansley is the champion of public health he would do well to test out this evidence with George Osborne in a cosy budget fireside chat on the impact of social welfare cuts on health. In the end this will be much more important than the sideshow of NHS ringfences...

# 15 Nautonier

I see the NIMBYS are alive and well on the Flanders blog!

Finally a think tank with the authority of the OECD has had the sense to state the blindingly obvious - the planning system in this country is a creaking, tottering mess requiring radical reform.

We have the lowest house building rate since the 1920's and the average age of the first time buyer is 37. Everyone wants "affordable" housing, but there is no such thing, and never will be until land supply is freed off.

Since coming to power, this administration has curtailed the land supply to small builders with the introduction of their so- called "garden grabbing" legislation. As 1 in 4 new houses formerly were built in someone else's back garden, this reduced the housing supply by 25% almost overnight. Similarly they have curtailed the land supply to big builders by abolishing the regional spatial strategies - thousands of agreed permissions were put in jeopardy as a consequence.

Net result: a planning vacuum, where nothing gets built, prices remain high and our children have no realistic prospect of owning a house.

This situation has got to change.

House building is by definition a labour intensive exercise - precisely what is required at a time of record unemployment.

From my experience, there is only one way out of a recession....build your way out!

21 healthyeconomics
I agree that welfare benefits people in real terms, which is by far a better way of looking at it.

Some welfare, like JSA and Working Tax Credits, also act as an 'automatic stabiliser' - a kind of self-righting mechanism for the economy. When people loose their jobs, or have to earn less during a downturn in the economy, they stop spending because they have less income, and this magnifies the downturn. Benefits make sure that their income does not fall so low they they stop spending entirely, and this helps to slow and stabilise the contraction in the economy.

Other forms of welfare help those who would not normally have a chance at working to have some kind of future, and in macroeconomic terms this increases the UK's potential GDP by reducing structural unemployment.

So welfare is also a macro-economic necessity which I find comforting.

OECD complete waste of space on planet -people in highly paid think tank pontificating in ways that affect dramatically lives of others. Offered no sensible advice prior to crash, no point in listening to them now. Condems have cut public spending too fast in a recession/slow recovery -result will be (as even OECD acknowledges) slower growth and that means higher unemployment, and slower recovery of public finances. Current situation gives same feeling of gross economic mismanagement as Heath govt of 70-74. Only difference is that the improving situation Heath inherited in 1970 was courtesy of future SDLP figure Roy Jenkins. In place of a Jenkins LibDems can now muster Danny Alexander -I would laugh if it was not so serious.

re #1, #4, #8, #14
Economics Student,
For the rest of your life you will be bombarded with statistics, some of which will later be amended or re-assessed in the light of other accrued knowledge. I would advise caution with statistics and keeping ears and eyes open when out in the real world in order to balance some or most of the claims that are made.

Had you been paying attention, the gent from the ONS mentioned - when revising the Dec. numbers for the FIRST time - that there would be revisions on at least one more occasion. To base the likelehood that our stuttering growth has gone negative for this year as well as last on these numbers at this stage is brave if not brave and foolish.

And it doesn't really matter unless you want to make a political point. Which is how I read your comment.

We are in considerable trouble. The only way out is to get down and dirty and work our way out.

12. At 5:08pm on 16 Mar 2011, Charles Jurcich wrote:
Marnip,
Manufacturing is looking healthy, but it is only 13% of the economy, the service sector is 70%, and is not looking very healthy at all.
-------------------------------------------------------------------------
Charles,
Think you may be a bit low on manufacturing - 17.something was a recently accepted figure and I see that some put it as high as 22% which I find hard to believe.

You are right that the service sector is looking a bit grim, especially some retail areas.

I'm wondering whether we may see more estate agency failures but, unlike the 1990's, before a property crash instead of afterwards.

25. At 7:41pm on 16 Mar 2011, Up2snuff

Yes I take notice of Statistics and leading /lagging thingies but I treat them with suspicion and try to to enhance them with knowledge of real life. That is my approach.

If you think that is political so be it. I don't. I have little time for politicians of any colour and that is based on my assessment of their intelligence and their convictions.

As regards working our way out of trouble, I agree and the government is in a unique position to generate those badly needed jobs and is failing in its duties by not doing so. Failing badly.

Presumably earlier drafts of the report said "over the top and divisive" as opposed to final draft "ambitious and necessary".

Exactly how many redrafts does the 'independent think tank' go through with governments in order to ensure access next time?

Good however to see Osborne at last listen to Balls, if only on how to deal with all those 'independent' experts out there.

- For SMEAR - Haemorrhage Boss in Microscope Slide Show.

- For SALE - Second hand Police Station going cheap and cheerful.

- For Me - Ctrl A then Ctrl V alas.

I consider that OECD and IMF are always worth listening to, whatever UK government is in power. The received advice may not always be welcome, but at least it is relatively unbiased from an internal UK point of view. It does not matter whether you are a Guardian or a Telegraph reader, what you read every morning is always slanted. At least the OECD advice does not have a UK political slant. It gives the UK general public the chance to question UK media bias, and to hold UK politicians to account

Just to say the OECD report is here

https://www.oecd.org/document/38/0,3746,en_2649_37443_47283558_1_1_1_37443,00.html

I sure all who have posted here have read it rather than just journalists' selection from the summary. :-)

Also to say briefly that the 'unemployment' figure is an estimate from the number people who said in a survey held in the three months prior to the end of February that they were seeking employment and could start within the next two weeks.

It is a measure therefore derived from people who HAVE said they are available for employment sometime in the past three months

Given the dynamics of the labour market system I am surprised it is an indicator of anything! But more on that later later.

I would add that senior high school students in the USA study policy prescriptions that may follow from the US version (it is world wide!) and good discussions take place for example on Yahoo as they prepare term papers. Maybe we should invite them to join us here.

3 oldsandbanker0

'It does not matter whether you are a Guardian or a Telegraph reader,'

Thank goodness for that, I don't read either unless my fish n chips come in them.

22 houseflogger

'From my experience, there is only one way out of a recession....build your way out!'

Worked in the 30s in the US

26 Up2snuff

'I'm wondering whether we may see more estate agency failures but, unlike the 1990's, before a property crash instead of afterwards.'

There's not going to be a property crash snuffy. Sorry ol' boy but the shortage caused by the collapse in new building activity is going to prop up the existing levels give or take a bit. The banks control the market. Reduce supply and the price stays up. Better that than whole street loads of repos on your books. They play Monopoly too. throw a double six to get out of jail free. Land on the right square and you can dip into the community chest. Sometimes you can Pass Go and pick up a bonus.

Estate agents out of a job. Hmm - lets get them marching in protest along the high street I'm sure there will be a lot of public support.

#6 >>What I find interesting is how the Swiss banks, who bankrolled every speccy builder in Eastern Europe, have emerged strong, with an even stronger currency, despite huge wages and costs, a rising property market and no sign of them being labelled PIIGS.

Perhaps it has a lot to do with the Swiss making loans on a hard-headed business-like manner and not on politically correct basis. Perhaps they also don't make loans that are insufficiently backed by deposits, guarantees and potential income. In other words, no toxic 125% loans on the "say so" of the borrower(s).

#22 >>From my experience, there is only one way out of a recession....build your way out!

Do you mean like they did in Ireland, Spain and Portugal ?? Is that where you got your experience from ??

It's the Men in Grey Suits - again and again and again. The rest of us don't stand a chance.

As post 35 noted - a good number of those grey suits are Swiss.

We've had Statesmen; politicians; lawyers. Now the MiGS run the world.

31 cping500,
"Also to say briefly that the 'unemployment' figure is an estimate from the number people who said in a survey held in the three months prior to the end of February that they were seeking employment and could start within the next two weeks.

It is a measure therefore derived from people who HAVE said they are available for employment sometime in the past three months "
----------------------

Stephanie would not necessarily mention this because - let's face it - it's a very obvious point, and most of the commentators here already know this.

It is normal that, when the unemployed (official or hidden) believe there are jobs to be had, the hidden unemployed re-enter the labour market, pushing the Rate of Unemployment (RU) up, but when they feel that jobs are not likely to be found, they leave the labour force (becoming 'hidden' unemployed) and this pushes the RU down.

Recently, there has been no clear direction as to whether the hidden unemployed are re-entering the labour market, because they do not feel confident about the recovery.

36 ishkandar:

'#22 >>From my experience, there is only one way out of a recession....build your way out!

Do you mean like they did in Ireland, Spain and Portugal ?? Is that where you got your experience from ??'

No - like they did in the US in the 30s. The cost of the building is only a minority part of the price of property in the UK. The UK price is dominated by the land price which is deliberately supply limited. It is a simple supply and demand curve.

38 C J

Additionally many made redundant with a payout will shed out of the system promptly at the end of 6 months when the non-means tested period ends, along with any benefit payment. They still remain unemployed but off system and out of the stats.

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

So, it's telling us what we all knew but is worth revisiting that Labour made a total mess of our economy. Worth remembering because there are two dealers out there trying to peddle their wares along the lines of don't cut this don't tax that we can carry on borrowing as before with no consequences.

If we have learnt anything from the last 14 years of mis rule its that the idea of just more and more public spending is the answer is wrong, totally discredited! It's been tried and it has failed - most spectaculalrly in education but defence and dare I say it the NHS too.


It has failed just like the laissez faire attitude to business and finance - leading to the needless destruction of much of our productive base that preceded the Labour years, and sowed the seeds of the banking collapse and housing bust. So, unlike Japan (our prayers are with you) we have not just had a lost decade or two but 3 and counting as we have swung from one failed ideology to another.

So, now is not the time for self-congratulation Mr Osbourne, now is the time for clear and decisive action (not really the coalitions thing I know) and let's turn this UK around.

For all our woes (real and imaginary) we have much to be thankful for and can focus on change unhindered by tragedy that is afflictiong much of the World - both developed and developing.

"25. At 7:41pm on 16 Mar 2011, Up2snuff wrote:

We are in considerable trouble. The only way out is to get down and dirty and work our way out."

Are you referring to the legalising of prostition plus the regulation of the sex industry - in a bid to generate extra toursim and tap into a huge potential stream of tax revenue............

@27. EconomicsStudent wrote:

"If you think that is political so be it. I don't. I have little time for politicians of any colour and that is based on my assessment of their intelligence and their convictions".

This is a frequent refrain on these blogs and I'm getting right fed-up with it. This lordly disdain, being expressed by individuals who (evidently) see themselves as morally, intellectually and in every other way superior to a group of other individuals collectively labelled as "politicians". They apparently are, to a man and woman, venal (if not actively corrupt), stupid, ill-intentioned and in every way misguided, whilst the rest of us are pure as the driven snow, all-wise and all-seeing.

Well, they may be for all I know - but I strongly doubt it. Ask yourself why you believe that a human being who is a politician is inherently inferior to any other human being who is not a politician. The idea is, quite simply, fatuous.

One can of course dismiss the whole notion of democracy and, along with it, of any need for political parties and politicians to exist. But, assuming one does not take up that position in what way does it help our society to disparage the profession of politics? Why does any young person (because that's when people become politicians - when they're young) ever decide that they want to spend their lives in politics? To make loadsamoney? Hardly. To tell other people what to do? If they're a potential Lenin, yes - but that will mean that they want to close down politics for everyone except themselves and does anyone seriously suggest that we have any such? Essentially it's because they want to change (meaning "improve" as they see it) the world in some way - is that such an ignoble ambition, and in what way is yours superior?

I won't go on. But please don't congratulate yourself on your feeling of superiority to politicians: it's nothing to be proud of IMO

@31. cping500 wrote:

"I sure all who have posted here have read it rather than just journalists' selection from the summary. :-) "

Touché!

"I would add that senior high school students in the USA study policy prescriptions that may follow from the US version (it is world wide!) and good discussions take place for example on Yahoo as they prepare term papers. Maybe we should invite them to join us here."

But wouldn't they be too earnest and focussed for us...?

41 "There is no shortage of UK building land and with 800,000 empty houses... "

Then by definition these plots already have houses on them so therefore cannot be considered as building land!

Your conclusion is that "local people always know best". In my experience, when given the choice, local people invariable say "no" - as with most referendum situations.

In my view, the new "localism" agenda will represent a short window of opportunity for local people such as yourself to take control of the levers of power within the planning system. It remains to be seen whether this will result in any appreciable increase in the housing supply. If no increase is detected within say two years, I predict a rapid return to centrally imposed targets and you can look forward to more "eco-towns" and the sort of bolt-on housing estates that you clearly and understandably despise.

Alternatively, if every village in the land allowed 10 houses to be built, we would not have a housing shortage. Furthermore this would support local services, employ local tradespeople and provide a degree of "affordable" housing for local youngsters.

The ball is in your court for the next two years, don't waste the opportunity......

@33. Arthur Daley wrote:

"Worked in the 30s in the US"

Maybe. But what did they build? Not, I think, lots and lots of little houses. The focus was on massive infrastructure projects - on productive capital investment, by the state - in other words.

Actually, what really "worked" for their economy was the outbreak of WW II.

#22. houseflogger wrote:

""affordable" housing, but there is no such thing, and never will be until land supply is freed off"

That may be necessary, BUT it will never work as long as the prevailing philosophy remains that land is for investment and not use (see HMV and £600,000 homes that should be lived in by farm workers who can afford £100,000). All your proposal will do is flatter the balance sheets of banks! And further enslave and cripple the Nation's homeless and businesses. There can NEVER be sufficient land 'freed up' it is impossible - there isn't enough of it so long as then banks are not prevented from lending absurd sums that force the price beyond rationality.

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

Lucky for us that Labour is not in government to allow our national debt to rocket even higher than they did when they were in office.

In the last week alone we have witnessed both Spain and Portugal having their credit rating whacked.

"Portugal sold €1bn in short-term government debt on Wednesday, but had to pay a higher interest rate after Moody’s downgraded its credit rating amid fears the country will be forced to seek an international bail-out".

Had Labour been in power there can be no doubt that our credit rating would have suffered badly as well and we would now also be having to pay much higher interest charges to borrow more money.

Labour have always ignored this danger with their usual cavalier attitude and argued that we would be better placed to pay off a small portion of our rapidly increasing debt 'when things got better'.

Unfortunately for them their reckless gamble would have failed miserably. For not only have we had the spectacle of European states struggling to finance their debts and Middle East and North African countries in revolt, but now we have the catastrophe in Japan which also threatens a major global economic downturn.

Fortunately for us the Labour wreckers were not given the chance to decimate the British economy even more than they did when they were in office.

re #45
Are you sure that 'good discussions' and 'on Y@hboo' go together?

50. At 10:34am on 17 Mar 2011, sandy winder wrote:
Lucky for us that Labour is not in government to allow our national debt to rocket even higher than they did when they were in office.

In the last week alone we have witnessed both Spain and Portugal having their credit rating whacked.
----------------------------------------------------

In your eagerness to make a party political point (what is Nick R's blog for?) you fail to mention that both Ireland and Greece, as well as some of the Eastern European EU members, have also had recent downgrades despite following the austerity route.

Please try to post without the blinkers.

14. At 5:21pm on 16 Mar 2011, EconomicsStudent wrote:

"You are probably not aware of my views on current education standards, particularly in Economics, but nevermind."

Not sure how that's relevant. My first year of uni was 5 years ago; not that much has changed. The quality isn't that good, but what I brought up is really quite fundamental macroeconomic business cycle understanding.

"OK Manufacturing. The Guardian I think reported it quite well.
https://www.guardian.co.uk/business/2011/mar/01/manufacturing-data-gdp-cips-markit
So this is a leading indicator I guess in your eyes of a recovery. I think you might find many who don't agree."

No, this is a leading indicator by general, fundamental, simple business cycle economic analysis - something you really don't seem that familiar with. Now I don't have a Phd in economics, but it would be a stretch for me to claim an education in the subject without being able to analyse basic data trends.

I can find many people who disagree that borrowing every year for 10 years at deficit levels above GDP growth rates is a bad idea - that doesn't make them right. All ideas aren't equal; some people are just wrong.

"Look. If you want to believe you are in the middle of a recovery, that's fine."

Beginning, not middle. That's what 'leading' refers to in the phrase 'leading indicator'.

"Nobody can persuade you otherwise because you will just pull the leading /lagging nonsense until the next set of stats."

Where exactly are you studying economics that doesn't cover leading, lagging and contemporaneous indicators?

"I don't know what part of the country you live in but get out there and start talking to real people and try and get a feel for what is really going on."

The North. You know, the parts largely ignored by a fiscally responsible government for over a decade, where the public sector makes up a larger proportion than the private sector. Manchester to be exact. I know exactly what it's like thank you very much, and have a formal education in the subject.

I think perhaps you've realised a couple of months of first year economics doesn't mean you know anything, so now you retreat to the 'go and see real people' line.

Stephanie, I like the idea of promoting increased government investment in public projects recommended by the OECD. I would like to see, in particular, a start on a new London airport, large enough to act as THE European long-haul hub of the future. Situated in The Thames, it would have to be connected to the existing London airports by high-speed rail links, and to the Channel Tunnel line so that connections to France and Germany are available.
I also like the idea of a mechanism to promote increased house building. Communities will only ever be ready to accept significant new building volumes if they see something in it for them directly. I would suggest a local tax on land that gets building permission, as a percentage of the selling price, paid directly to the local council. This would produce a proper balance between local income and planning permission.

44. At 09:50am on 17 Mar 2011, torpare wrote:
@27. EconomicsStudent wrote:

"If you think that is political so be it. I don't. I have little time for politicians of any colour and that is based on my assessment of their intelligence and their convictions".

This is a frequent refrain on these blogs and I'm getting right fed-up with it. This lordly disdain, being expressed by individuals who (evidently) see themselves as morally, intellectually and in every other way superior to a group of other individuals collectively labelled as "politicians". They apparently are, to a man and woman, venal (if not actively corrupt), stupid, ill-intentioned and in every way misguided, whilst the rest of us are pure as the driven snow, all-wise and all-seeing

________________________________________________________

How else are you supposed to make your mind up about what's right or wrong ?

By all means, keep an open mind about everything in the universe but on my planet we sometimes have to reach conclusions about things.

I'm not sure why you are getting so upset

re #27
Hmmn. Government jobs.

At the present time about 1 in 5 of the workforce is employed by the State across the UK. The numbers vary from home country to home country. About three years ago the ratio was steadily advancing towards 1 in 4. If you want the present Government to create jobs, then you have to 1. Raise the revenues to employ unemployed people, 2. Create the jobs (ie find them something worthwhile to do) and that will use their skills (nearly posted skill-sets - ooops!), and, 3. Organise them into those jobs.

The last takes time as well as money. The present Government has been in power for eight months and has no money! Back to No.1.

Your suggestions will be welcomed.

12. At 5:08pm on 16 Mar 2011, Charles Jurcich wrote:
Marnip,
Manufacturing is looking healthy, but it is only 13% of the economy, the service sector is 70%, and is not looking very healthy at all.

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

Quite correct, but the point I made that seems to have been missed is that the manufacturing growth was driven largely by capital goods; tools and equipment.


This suggests that there is a demand for productive capacity, and is backed up by the manufacturing sector hiring workers. That demand for capital goods suggests companies are looking to build up their inventories, which suggests a recovery is underway.

Were no one buying anything, no firms would be looking to produce anything, so no firms would be investing in tools and machinery, meaning we wouldn't see the manufacturing growth we are seeing.

Capital goods have a trickle down effect throughout the economy, and employment in the industry rising leads to greater consumption, which leads to further economic activity - including services being demanded.

This is conventional economic logic, and some people here seem to think I'm saying something brand new.

re #43
No.

The events in Japan are horrific and very sad indeed. Every right-minded individual in this country and elsewhere would wish to communicate our heartfelt sympathy to the Japanese people; but in a cold and ruthless business world, are the trials and tribulations that will face the Japanese economy for years to come not a potentially huge boost for the UK and other developed economies.....

... a strong Yen makes our exports to Japan more competitive and Japanese exports to the world less so.
... increasingly expensive Japanese goods throughout the world create further opportunities for British made goods.
...at the same time, Japanses manufacturers have invested heavily in the UK and will want to find some way of holding on to their markets around the world while they rebuild.

Cue potentially substantial increases in UK exports and production and employment opportunities at the UK plants of companies like Nissan, Toyota, Honda, Panasonic to name just a few of the better knowm names.

None of us would wish any more woes on Japan, but every cloud....

"In a functional market, you invent something and you charge all the market will bear for it. Someone else figures out how to do it cheaper, or decides they can do it for a slimmer margin - not the same thing, you know.
In the first case someone is more efficient and in the second case they're just less ambitious or less greedy. They do it and you have to drop your prices to compete. Then someone comes along who's less greedy or more efficient than both of you and undercuts you again, and again, and again until you get down to a kind of firmament, a baseline that you can't go lower than, the cheapest you can produce a good and still stay in business.
That's why straight pins, machine screws, and reams of paper all cost basically nothing and make virtually no profit for their manufacturers.
So if you want to make a profit, you've got to start over again, invent something new and milk it for all you can before the first imitator shows up. The more this happens the cheaper and more efficient everything get. This is what the "system is for".
We are approaching the pure and perfect state now with competition and invention impossible easy now. We are approaching the economic singularity"
Globalisation is unfortunate for us in the West (cf Ricardo's wage equivalence). How can UK manufacturing compete in the long run. The Chinese and Indian workforces are almost infinite. Average wages in urban areas are £2,000 per year and less in rural areas. There is no minimum wage, no health and safety regulation whatsoever. The Totalitarian government won't tolerate and unions or industrial unrest.
Think children and young girls soldering consumer electronics together by hand for 18 hours a day until the fumes kill them. Or they cant take it anymore and jump off the roof of the factory (this is so common some factories have nets to catch the jumpers).
Researchers for The Sunday Times examined wage slips that showed many workers for multinational suppliers have seen no rise in pay for eight years. In the same period, consumer price inflation has eroded earning power in real terms and the proportion of China’s GDP taken by wages has fallen.
So higher pay fulfils two aims of China’s more enlightened policymakers. It will give workers more money to spend on goods, and it should also spur Chinese factories to move up the “value chain” and out of the sweatshop era.
Such Chinese firms face a tough time because, to take one example from the state media, most textile factories are surviving on profit margins of 1% to 2%.
But there is no question that foreign middlemen have room to cut their margins. When The Sunday Times tracked a plastic item that retailed in London for 99p back to its source, it emerged that the cost price at the factory gate was 22p. And when the factory’s raw material costs were stripped out, the Chinese supplier had only 6p to cover wages, operating costs and profit.
“In other words, wages could double and it could be absorbed,” said one British buyer.
The other side of the coin is the people that are doing well out of this system. Even hyper efficient businesses in China or India need capital to start. This why we face a fiancial crisi in the West. Allt he money is wahing out of the devloped world to fid a home investing in people that will work for 1/40th of what we will. The owners of capital are fine - they are making millions and are immune to the forces of globalisation. Worse still they are not paying anything but minimal taxes here.
Is this what you want to become? You really want to compete with the £2 billion workers in China and India, backed by a totalitarian regime.
The current government is not recognising the problem, They are in a policy stance of managed decline- a slow and inexorable race to the bottom where the vast majority of workers in the UK compete with China and equalise their living standards with them (at a level permanently and vastly lower than we are used to) whilst the very few who are rich enough to own significant and ever increasing lumps of capital, the bankers and the very senior management of multinationals experience stratospheric growth in income.
This is the path to mass civil unrest and misery.
Do something about it.
Watch:-
https://www.zeitgeistmovingforward.com

Then demonstrate on march 26th:-
https://action.unison.org.uk/page/content/march/
Join:-
www.38degrees.org.uk - these are the people that collected 500,000 signatures and force the government to back down on selling off our forests
Join www.onegoodcut.org - to complain and demand change in the banking system

#58 #43

But why not.... I since there will be an increase in those wishing to enter the sex industry because of the 'savings ' by GGO surely we should provide higher education and training for its practitioners so they could build on our already extensive skills and make it a world leader. and a key foreigner earner.

Maybe a well know export promoter could assist, and arrange a Damehood for Ms Whiplash.

"By all means, keep an open mind about everything in the universe but on my planet we sometimes have to reach conclusions about things."

And when the "conclusions" (I like that word) reached are based on premises which are manifestly absurd...What then?

You see fit, from your lofty height of having comprehended - what? life in general? - to pour unqualified scorn and disdain upon a group of people who at least have started-out with a laudable (IMO) aspiration. Moreover, one which many other people might have done well to embrace, viz, to try to improve the society in which we live. That's a definition of "politics".

*That's* what I'm getting upset about.

I too would like to see our society changed in ways which I believe would be for the better, and for that to happen would require that our politicians make bold choices and act resolutely - because the forces opposed to the changes I would want to see are enormously powerful, entrenched and (of course) determined to hold-on by every possible means to the privileged position they've acquired.

So I see little to be gained by routinely sawing our *elected* politicians off at the knees. They're going to need guts, plus all the moral support they can get.

But if you want to opt out, feel free.

If the OECD was a Doctor and gave some of the 'health checks' that they have been given - even the corrupt BMA (Doctors disciplining Doctors) would have struck them off.

The OECD are monkeys - like the IMF - they will dance to any tune the piper plays them. If you look at their record on forecasts they are so wild they would make the infamous 'Michael Fish' hurricane dismissal seem like a 'second sight'

We're plagued by misguided 'experts' in the field of Economics.

53. At 10:45am on 17 Mar 2011, Marnip wrote:
I think perhaps you've realised a couple of months of first year economics doesn't mean you know anything...


Heres a leading indicator for you. Rising unemployment with about £50 billion of Govt spending reductions. Thats £50 billion before any multiplier effect.

I am afraid you and your mainsteam economics analysis has been discredited I do not believe you understand how a modern monetary economy works and the fact that your leading, lagging indicators didn't tell you that the mother of all financial crises was around the corner proves it so go patronise someone else

59. At 11:16am on 17 Mar 2011, Graham Morgan wrote:

Graham you a blinded by optimism.

"... a strong Yen makes our exports to Japan more competitive and Japanese exports to the world less so."

...unfortunately our economy doesn't have a large export base which competes with Japan - China and Taiwan are likely to be the winners here.

"... increasingly expensive Japanese goods throughout the world create further opportunities for British made goods."

It's just a shame world demand is falling then isn't it?

"...at the same time, Japanses manufacturers have invested heavily in the UK and will want to find some way of holding on to their markets around the world while they rebuild."

Really? - so tell me how does the 'return on a UK toyota plant look when the Yen has risen to outstanding levels? - The labour may be cheap, the production may be cheap - but then the profits are cheap too! Did you think this was some sort of 'dis-equilibrium' where only good things happen and the bad sides wash away?

"Cue potentially substantial increases in UK exports and production and employment opportunities at the UK plants of companies like Nissan, Toyota, Honda, Panasonic to name just a few of the better knowm names."

Cue the removal of the Japanese consumer from the market - technology bubble bursting, all the jobs lost in those industries....as well as the job losses in the nuclear industry.

"None of us would wish any more woes on Japan, but every cloud...."

The cloud always has 2 sides - you can't ignore the downside and merely congratulate the upside - it's a philosophy destined for disappointment.

It's not just the financial crisis. It was market forces and the logic of markets that led to humanity building nuclear reactors on the edge of a tectonic plate.

According to this BBC article
https://www.bbc.co.uk/news/business-12758367

... if you are 65 you have received £220,000 more from the state than you put in. And yet those being born today will receive £70,000 less than they put in.

Surely stealing from your children must rank quite high in anyone's judgement of morality? Is this not a statement of the sick state of our economy?

This clearly shows that a massive wealth tax raid on the older generation is both needed and totally justified.

One way of doing this is to change taxes on housing, where most wealth has been transferred from young to old. There should be serious debate about how this can be reversed. The problem is there is far too much vested interest in those in power. I think it was Chris Huhne who was reported as having an 8 property portfolio, and I imagine many others around the cabinet table would be in a similar position... hardly likely to initiate or engage in policies that would wipe out significant portions of their own wealth.

62. At 11:35am on 17 Mar 2011, torpare

OK I'm going to agree to disagree with you.
You keep your repsect for politicians and I'll maintain my distrust of them.

60. At 11:26am on 17 Mar 2011, Payguy wrote:
"In a functional market, you invent something and you charge all the market will bear for it. Someone else figures out how to do it cheaper, or decides they can do it for a slimmer margin - not the same thing, you know.
In the first case someone is more efficient and in the second case they're just less ambitious or less greedy. They do it and you have to drop your prices to compete. Then someone comes along who's less greedy or more efficient than both of you and undercuts you again, and again, and again until you get down to a kind of firmament, a baseline that you can't go lower than, the cheapest you can produce a good and still stay in business.
That's why straight pins, machine screws, and reams of paper all cost basically nothing and make virtually no profit for their manufacturers.
So if you want to make a profit, you've got to start over again, invent something new and milk it for all you can before the first imitator shows up. The more this happens the cheaper and more efficient everything get. This is what the "system is for".

------------------------------------------------------------------------
I am uncertain as to whether you posted this, Payguy, or whether it is from someone else and you accidentally missed the attribution. Never mind.

There are several other strategies for the inventor/original manufacturer. One is to take your product up market, restrict quantities and charge a premium price. Another is to find a niche market. Yet another is to try and create a fashion or 'trend' around your product. Nautonier would want me to mention tariffs at this point, so you might seek these or some form of protection. Or a combination of all these could be sought and employed.

There is one more. You can struggle on or sit around and hope that given enough time a new generation will discover you when most or all of your competitors have gone out of business.

67. At 12:00pm on 17 Mar 2011, jonearle wrote:
According to this BBC article
https://www.bbc.co.uk/news/business-12758367

... if you are 65 you have received £220,000 more from the state than you put in. And yet those being born today will receive £70,000 less than they put in.
Surely stealing from your children must rank quite high in anyone's judgement of morality? Is this not a statement of the sick state of our economy?
This clearly shows that a massive wealth tax raid on the older generation is both needed and totally justified.
==================================
Absolutely!
There is a very good film called 'Soylent Green' where, once people reach a certain age, they are killed and their bodies used to make food for the rest of the population. What happened to their excessive assets was not mentioned. Perhaps we should have a similar policy?

By the way, my £220,000 has not arrived yet.

jonealre- this is by defenition how fractional reserve banking makes the money supply work.

If the government pays down its debt then the private sector pension schemes will lose an equivalent amount of money (80% of government bonds are owned by your pension schemes).

Look at this graph at the bottom of this page to see whats happening-

https://blogs.telegraph.co.uk/news/benedictbrogan/100080176/george-osborne%e2%80%99s-stock-is-high-but-this-budget-is-a-dangerous-moment/

Labour and Tories can paly a game about whether to allocate it slighty more to workers or capitalists and bankers but at the end of the day unless the money system is reformed the world ends up utterly in the hands of a handful of oligarchs.

up2snuff - I agree with what you are saying.

The issue is that the UK does not largely and never will have a big proportion of fast moving, innovative, adaptable, high tech industries.

A few here (maybe 5-10% of our adult population) might survive the coming singluarity by competing in industries where the living standards can be high but the vast vast majority of people will be reduced to slaves in the way I describe.

The alternative model I am proposing is a European market with import tarifs, government investment in adapatable and high tech industries and a lot of social protectionsism.

The point of life is not to race to the bototm so a handful of people can live over the masses like Kings whilst everybody else lives in greater and greater misery. We must organise ourselves so this doesnt happen to us.

11. At 5:07pm on 16 Mar 2011, richard bunning wrote:
"...a large back pocket wodge to set against the borrowing requirement this year that the last incoming Labour government didn't have to address a very similar level of public borrwing inherited from Ken Clarke's Tory chancellership. "

Not sure where you get your figures from Richard but I'm pretty sure Labour inherited a budget surplus when they came into power back in '97 with public debt around 40% of GDP (and falling). The coalition inherited public debt at 52% of GDP last year (not including PFI which would add a couple of % points onto that) and a deficit of 11%. If you're talking pound notes and not percentages then the figures look even further apart.

Also, as Ken Clarke left the budget in surplus, over the next 3 - 4 years after labour came to power, public borrowing came down substantially as Brown maintained the Conservatives spending plans (eventually came down to 30% in 2001). Compare that to what was left for this Government, borrowing expected to keep on rising for the next 3 years, reaching 80% in 2013.

Even with the £100Bn+ in bank assets etc that we may have in our back pocket, this wouldn't even cover the deficit in spending for 1 year, never mind the £1.4Trn of debt we have. Whichever way you look at it, Labour left us in a real mess. Ken Clarke left Labour a golden set of public finances, falling debt, budget surplus, falling inflation, steady interest rates, falling unemployment, steady house prices.. The list goes on.

@67. jonearle wrote:

"One way of doing this is to change taxes on housing, where most wealth has been transferred from young to old."

Very easy to accomplish:- introduce a Land Value Tax (replacing many other forms of taxation)-
https://www.landvaluetax.org/

(Not sure I share your premise, but that aside...)

64. At 11:43am on 17 Mar 2011, EconomicsStudent wrote:

"Heres a leading indicator for you. Rising unemployment with about £50 billion of Govt spending reductions. Thats £50 billion before any multiplier effect."

That's a lagging indicator in many ways, actually. Moreover, reducing spending which largely goes on consumption and doesn't stimulate economic growth at all (for a decade too) reduces our interest payments.

"I am afraid you and your mainsteam economics analysis has been discredited I do not believe you understand how a modern monetary economy works and the fact that your leading, lagging indicators didn't tell you that the mother of all financial crises was around the corner proves it so go patronise someone else"

One of us uses the moniker 'economics student'. I would suggest that that is an attempt to confer authority on yourself. I don't think you could even name the economic school I subscribe to, because you clearly don't know much about it at all.

All the leading indicators pointed to bubbles - it would be the Labour government that ignored it, in favour of a hybrid system whereby spending money and investing money are equated, and a large state is equated with socialism.

Come back when you've studied economics a bit more dear boy. I notice you didn't deny it when I said you seem like a first year economist...

@68. EconomicsStudent wrote:

"You keep your repsect for politicians and I'll maintain my distrust of them."

You've subtly altered the terminology. It wasn't "distrust" I was attacking (nor uncritical respect I was advocating). Where possession of power is concerned there's always need for a healthy dash of distrust: "power corrupts..."etc.

No, what I was on about was the widespread propensity to lapse into complete cynicism, by labelling all politicians as by nature (by definition almost) worthless deadbeats and - by implication - those who express that view as being in some way morally better. This strikes me as hubris, as well as calculated to lead to no improvement whatever. It might even be a self-fulfilling prophecy.

Personally, amongst historical figures I rate as admirable human beings are (this will appal/amuse you I imagine) some politicians, without whom the world would have been a far worse place today IMO.

71. At 12:21pm on 17 Mar 2011, Payguy wrote:
jonealre- this is by defenition how fractional reserve banking makes the money supply work.
If the government pays down its debt then the private sector pension schemes will lose an equivalent amount of money (80% of government bonds are owned by your pension schemes).
=========================
In the extremely unlikely event of the government repaying its debt whoever was holding the debt will have cash instead; they will not lose anything. In fact nearly all government debt is repaid after a specified period 5 years, 10 years etc. but another loan is taken out. A lot of gilts are owned by pension funds and insurance companies about 40% I think.
Does the first paragraph refer to johnearle at 67. If so I suggest that you read it again. FRB is when a bank, building society, credit union lends out part of its deposits and keeps a fraction in reserve.

@70. AnotherEngineer:

Excellent!

(especially the last line)

"All the leading indicators pointed to bubbles - it would be the Labour government that ignored it, in favour of a hybrid system whereby spending money and investing money are equated, and a large state is equated with socialism."


Ah so thats it. Politics.
A small state. Good old fashioned neo-liberal common sense.
Now I understand the personal attack but I'm not going to join in.

As to conferring authority on myself, i realise I have none but still enjoy debates and expressing my opinion and will continue you to do so until you guys ban that too.

Ken Clarke left £350bn of debt in 1997 having more than doubled it during his golden chancellorship. He presided over some of the highest deficits from 1980-2010. When he left office the deficit was still over £30bn but thankfully he had finally managed to start bringing it down. All of this without a recession in the preceding 5 years and continuing disinvestment in public services. Please lets not look on his tenure as economic nirvana. Check out hm-treasury.gov.uk, public sector databank if you need convincing.

Going forward we know the difference between Centre Coalition Govt and Centre Opposition.

One says it is going to remove structural deficit over 5 years, the other said it would halve it over 4 years.

I looked at the OBR November update - strangely structural deficit doesn't appear anywhere. I suspect if you ask George O or Ed B the sheer amount of tumbleweed would knock you over.

So I'm going to have a bash. Deficit at election a little over £150bn, so lets say £100bn is structural (dont know but I think this is prob on high side, however as previosuly indicated no politician or quango report to help me).

So we run that off over 5 years for the Torylition and run-off to £50bn over 4 years for Labour (we assume they both benefit from some mystical economic growth that gets rid on the other bit of deficit).

For the period of this parliament that means about £90bn total extra debt arising from Labour. This is in context of projected debt of £1.3trillion by 2015. Or if you prefer in the context of around £700bn of govt spending each year.

A little history to throw in - Labour/Tory spending plans pretty much the same for much of 1997-2010 (and please remember that good ol Ken left us with £350bn of debt having more than doubled it during his impressive chancellorship).

The Tories did well in employing the "its the economy stupid" argument at the last election, but not quite well enough, hence coalition. But lets not try and pretend this was based on some massive difference in economic competence or indeed past and future policies.

Apologies to those who dont like their economics blog dirtied with any hint of politics, but better that than misinformation.

76. At 12:48pm on 17 Mar 2011, torpare

OK I take the point.

I suppose I'd find this more useful if I knew what the OECD track record was. How good have they been at forecasting, rather than just describing the past? When they assessed the UK economy before the 2008 crash, what did they say then? In other words, do they parrot the commonly-held views at the time or do they have any sort of record of telling us something we didn't know already? I'd take more notice if in 2007 they had said the UK economy was dangerously based on borrowing & consumption, with a financial sector that was getting too large & too fat based on this, with a severe risk that the bubble that was the overheated housing market would burst, causing mayhem in its wake. Perhaps they did say soemthing like that. But unless they did, it seems to me they are just supporting the conventional wisdom - which may or may not be right.

We all know what 'ambitious' in academe-speak means: it means that the reviewers are about to junk what they previously said. An unsurprisingly slow process for the OECD.

Krugman blog, September 17, 2010: 'Extraordinary Elite Delusions and the Madness of Committees'

"Future historians will marvel at the austerity madness that gripped policy elites in the spring of 2010. In a combination of blind panic and irrational exuberance, organizations from the ECB to the OECD suddenly abandoned everything we’ve learned, at bitter cost, about the economics of recessions, and raced to the conclusion that fiscal austerity was the way to go in the depths of a slump — indeed, that it would actually be expansionary.

And not just fiscal austerity: there were also widespread demands that interest rates rise in the face of falling inflation and high unemployment. The May OECD Economic Outlook exemplified the madness.

Now the OECD is coming as close as such organizations ever do to admitting that it was wrong.

What a strange trip it has been."

"A health check for the UK" is the title of Stephanie Flanders blog.

Personally, I don't give a damn about the OECD opinion on the UK. Who are these people? Furthermore, who gives them permission to comment and who are their contributors and members?

Indeed, who pays for the very powerful OECD - and who audits their opinions in an open, honest and understandable way for the general population who are ultimately affected by their 'opinions'?

#70. (ref 67.) There is a very good film called 'Soylent Green' where, once people reach a certain age, they are killed and their bodies used to make food for the rest of the population.

But on a serious note, look at what happened in Germany in the 30's... years of blaming the Jews for stealing the wealth of the nation and the gradual build up of resentment. Eventually people's thinking "snaps" and they accept inhumane policies.

I think it is very likely that within 20 years the younger generations put large restrictions on how money is spent on the older. e.g. not giving free operations to the over 70s. So the older generation should think a bit more about spreading the wealth more evenly before resentment builds into the younger generations.

@3. At 4:34pm on 16 Mar 2011, Marnip wrote:
"EconomicsStudent @1.
I take it you're not familiar with leading/lagging indicators then?"

Presumably it's similar to current-voltage lead/lag in AC circuits?

#85
Yes this is a serious topic worthy of discussion, but don't forget that when these old people die their 'wealth' will pass to other, probably younger, people.
I think that it irresponsible of the BBC to publish this very short precis of a report with no explanation of how the figures are calculated or, more likely, guessed.

79. At 12:56pm on 17 Mar 2011, EconomicsStudent wrote:

"Ah so thats it. Politics.
A small state. Good old fashioned neo-liberal common sense."

No, actually I'm all for socialism. I just happen to understand what socialism means, and that Labour doesn't represent anything socialist - and never has.

The problem with students (as I have been and saw the same problem in myself) is that there's very little independent thought when you're trying to pass exams. It's very easy, in this context, to make the false dichotomy of 'large state/small state', and equating those options to socialism/capitalism respectively. It's just not true. A large state is unsustainable, and that's neither economics nor politics - it's mathematics.

"Now I understand the personal attack but I'm not going to join in."

Pointing out that you appear to have no knowledge of basic topics, in a subject your name suggests you study, is not an attack. If you don't like being challenged by someone who has equally recently spent time in higher education studying economics, don't call yourself 'economics student'. It confers a certain authority as I mentioned - and it doesn't appear to be well-backed by knowledge.

"As to conferring authority on myself, i realise I have none but still enjoy debates and expressing my opinion and will continue you to do so until you guys ban that too."

Really now? My participation in debate with you surely points to the fact that I'm not against you expressing your opinion. That's very childish of you. If I remember correctly, it was the Labour Party (whom I have been criticising, along with their large state mentality) who tried to remove the basic freedom to criticise religion - they couldn't get that through the Lords despite their great majority in the Commons. So, they wrote letters to the Islamic community blaming the Lib Dems and Tories for not protecting their precious right not to have their feelings hurt.

Which brings us back to you: you don't take criticism well, do you?

77. AE you are right, I am not explaingin myself clearly here.

The debt pay down is as you say doubtful. I'm skeptical the Coalition will last full term. Even more skeptical that outside events wont overtake them and force a change in economic direction. As it will in ireland, Greece, portgual, and SPain. The US and JApan are even more overleveraged.

Japan, the Middle East, Peak Oil are also game changing events.

Maybe another fiancial crisis?

But on your other points-

The pension funds will take a hit- no more 3.7% interest from the Government. They'll have to find their rents somewhere riskier.

£120 billion will still come out of the economy in the form of public sector job cuts, reduced capital expenditure etc and there will be a multiplier effect on the private sector.

I stand by the points about frb forcing government and private debt to spiral out of control into the future. (see the graph)

There is no "economic" distinction between public and private money - it all sustains economic activity and living standards. You can redistribute one way or the other. Underneath it all a debt based economy does what it says - increases debt intergenerationally.

FRB is the cause of inflation and the cause of stagnating living standards over the decades.

The inequality caused by our economic system means that the increased standards of living that flow form technological advances and higher world population levels are not shared at all equally.

The standard of living of the top 1% sky rockets year after year. The effect of inflation and stagnating wages are a long term effect on the rest of us meaning we need to go into increasing levels of debt (public and rpivate).

As an example of the interaction. The uber rich multinationals do not pay their workers in the UK a sufficient wage to live on. The taxpayer has to step in with working benefits such as working family tax credit, housing benenfit etc. This cost is passed to the middle classes as taxes. Same for the cost of the unemployed: increased profit seeking means companies employ fewer workers where they can and the middle classes again pick up the tab.

The alternative (current governments) plan is to race to the bottom as descibed in my earlier post.

86. At 1:47pm on 17 Mar 2011, Stuart Wilson wrote:

"Presumably it's similar to current-voltage lead/lag in AC circuits?"

I expect it's exactly the same. I base that expectation on nothing, though...

Just a little note for all the die-hard politico's who adore this coalition so much.

We currently have a inflation rate higher than Zimbabwe! - we used to laugh and joke about Za-Nulabour but at least they were jokes!

https://www.bulawayo24.com/index-id-business-sc-economy-byo-2082-article-Zimbabwe+inflation+down+to+3+percent+year+on+yer.html

Our inflation rate with our low growth predicitons from the OECD are screaming 'stagflation' - but don't let that worry you....I mean you've changed Governments now....what could possibly go wrong?

(just a note, Japan are on their 5th PM in 5 years - it seems that economic stability is a pipe dream for economies running with capitalism)

Just like the nuclear power plant - Government will NEVER admit when they have lost control - for fear of 'losing control' (if that makes sense) - what works for nuclear meltdown also works for economic meltdown......except economic meltdown is not an isolated incident.

I would suggest that all readers and posters on all business and political blog sites, go to the OECD website as a start base? Have a good long, hard look. If you have any other time - look at the UN websites too?

Also look at the Arab League and OPEC sites? Discover the European Commission website. Find out what your MEP is paid and their expenses.

The list is endless, yet if you have time to investigate much of the above you will be unpopular if your mention them in our UK democracy on BBC sites, allegedly? If this gets past the mods, am grateful.

88. At 2:01pm on 17 Mar 2011, Marnip

I don't want to bore everyone else by quoting and responding to each of your paragraphs in turn so I bow to your superior, if rather weird, logic based on more experience of life, more knowledge and no doubt more impressive qualifications.

Well done Sir, you win. Bye now.

93. At 2:24pm on 17 Mar 2011, EconomicsStudent

You retreated from the second any economics was mentioned, choosing instead to resort to ad homs, generalisations and false extrapolations. You must be very proud of those debating skills you've honed through your enjoyment of it.

Cry me a river at your embarrassment.

91. At 2:05pm on 17 Mar 2011, writingsonthewall wrote:

"Our inflation rate with our low growth predicitons from the OECD are screaming 'stagflation' - but don't let that worry you....I mean you've changed Governments now....what could possibly go wrong?"

I'm not sure that's the mentality of people who support the coalition in general. Take me, for example - first time ever voting, voted Conservatives. Why? Because I agree with free market capitalism? Because I have a trust fund? Because I went to a finishing school? No to all three, as none of those things are true of me.

The fact is, there are limited options in politics. You have Labour who didn't have a clue what they were doing, so I couldn't vote for them to get us out of the mess they were incompetent enough to get us into in the first place.

Couldn't vote Lib Dem (they won in my constituency anyway) because I don't believe they have the talent available, nor the conviction, to sort out the economy with the tough measures needed.

That leaves the Tories, who would be tough on the deficit and follow through, yet I'm not keen on them in the long term. So now I'm personally in a period where I think they're getting the general idea right, and the results will come - but I'd like to see cuts in fuel costs (not just abolition of proposed rises), and I don't think that'll come.

I'd hope it does, but it doesn't look that likely. I don't have full confidence in the Coalition, but I don't think there's a viable alternative at the moment - so I see little choice but to support them where I believe they're correct, and criticise where they fail.

Now, what alternative to the three main parties would I like to see? A socialist party, but a true socialist party. One that would encourage the collective ownership and control of the means of production in businesses by the workers. More firms in the mould of John Lewis, rather than the poor man's excuse we have which is the state system. Small state, more of a right of the workers of all levels to a share of the profits a firm makes.

That would be socialism, when combined with voting rights of the workers on who the board members should be. Not the sad alternative provided by Labour, or the objectionable results of capitalism as the classic Tory philosophy.

Let me know when that comes about...

So in the absence of a "true socialist party" you go and vote tory? That sounds a bit bonkers to me tbh.

89. At 2:02pm on 17 Mar 2011, Payguy wrote:
Firstly the government will find it very hard to stop the debt from increasing let alone reduce it.
You say ‘FRB is the cause of inflation and the cause of stagnating living standards over the decades.’ Do you want to stop the banks from lending out their deposits? How would anyone get a mortgage, credit card etc.
You also say ‘The uber rich multinationals do not pay their workers in the UK a sufficient wage to live on.’ You need to be careful with generalisations. I am currently doing some work for HP in an office between the UK HQs of Microsoft and Oracle. If you saw the cars that their workers drive you would probably withdraw the statement. The same is true of IBM, GlaxoSmithKline, Exxon, Shell, Goldman Sachs, Unilever etc.
The current government have done little to curb profligacy e.g. Feed in Tariffs for Solar Power.

The localism agenda will certainly curtail the number of houses built over the next few years. We are all NIMBYs at heart and if someone from outside (i.e. central or regional government) is not telling communities how many homes they will need to meet future demand in their area, then local communities will just say 'no thank you'.

We don't just need more homes because of the growing unfulfilled demand (3 million plus on council house waiting lists and a whole generation under 35 unable to buy) - it's the housing industry the fuels much of the economy, not just in the construction of the homes themselves and the work that creates, but also in their use and occupation - equipping them with carpets, sofas, kettles and so on.

Well-meaning local people will unwittingly be depressing their local economies in the name of giving power back to communities. My experience of local government is one of the self-interest of council members acting against the wider longer term interests of their communities. This is a policy that needs to be put in a jar and doused in vinegar - or to put it another way "Pickled"!

In a couple of years' time, if the Cam-Clegg experimental economics (for
which we are acting as guinea pigs) has been shown to fail - if, let's
say the UK deficit is rising owing to low / negative growth etc. - what
will the OECD do to compensate us mere citizens / taxpayers? Nada, and
that's what their opinion is worth? What were the OECD advising in the
Autumn of 2008 when the banking crisis broke? Not much.

TheGingerF...

seeing as you have become such an expert on numbers and given the BBC has decided to have selecto-vision about the OECD report in the UK economy, perhaps you would both like to comment on these three extracts (as it is freely available)..

From the executive summary:

'Strong growth and macroeconomic stability in the run up to the crisis had hidden a build up of significant imbalances, influenced by overreliance on debt-finance and the financial sector and booming asset prices. These imbalances need to be addressed to ensure a sustainable and balanced recovery. The government is pursuing a necssary and wide ranging programme of fiscal consolidation and structural reforms ahead of achieving stronger growth and a rebalancing of the economy over time'

From the Assessment and recomnedations:

Significant imbalances had developed, however, in terms of public and external deficits.... these imbalances exacerbated the downturn during the global recession and contributed to a more pronounced fall in GDP, a larger fiscal deficit and higher inflation than in most of the OECD.

Point 24:

Despite sharply rising school spending per pupil during the last ten years, improvements in schooling outcomes have been limited in the United Kingdom. Average PISA scores, measuring cognitive skills of 15 year olds, have been stagnant and trail strong performers such as Finland, Korea and the Netherlands. The use of benchmarking in England is more widespread than in virtually any other OECD country...."high-stake" tests can produce perverse incentives....Evidence suggests that improvement in exam grades is out of line with independent indicators of performance, suggesting grade inflation could be a significant factor. Furthermore, the focus on test scores incentivises 'teaching to tests' and strategic behaviour and could lead to negligence of non-cognitive skill formation.


The reality is, there was never a more damning indictment of the ex chancellor and prime minister and the current ex childrens' minster and now shadow chancellor than this independent report.

Whichever way you spin it this country and its children have been grossly mismanaged for thirteen years and we are all paying the price.

Why anyone would listen to what Balls and Miliband have to say about anything ever again is a complete mystery. They, by their own admission had 'front row seats' in the most cancerous administration for decades.

So we had 'significant imbalances in public deficits'
As a result we had a more pronounced downturn than most of the OECD
And there was grade inflation and negligence in the education system.

Please explain how these important passages managed to be missed from your selected quotes?