So how's austerity going?

Discussion in 'Current Events' started by Plechazunga, Jan 26, 2012.

  1. Jan 27, 2012
    #41

    spinoza Paz's ion

    Joined:
    Oct 26, 2001
    Messages:
    24,079
    Location:
    Walking in a whisky wonderland.
    The reason we continue to have a AAA rating is because we have a path to a lower debt level. So yes, we could borrow a bit more and invest (and we should). But we still need to cut pensions, spending, and generally do all that fecking over of the little man that people are up in arms about. To keep the AAA rating you need the rating agencies to agree to that path. But it's not a barrier to borrowing more, as long as the path still looks sensible. That's the key argument against austerity.

    And I'm sorry, but the US doesn't need to worry about 1 agency downgrading it by a single notch. 2 agencies might be a problem. 1 agency by 1 notch would be a disaster for the UK. We are a small economy these days, dwarfed by China, the US and the Eurozone, and soon Brazil, India, etc. It's far easier to move our bond market. If you think the Eurozone's bond market moves at the caprice of investors, I can assure you that ours is even more sensitive.

    Lastly, the City of London will continue to remain the most important part of the UK economy. It's the UK's largest export industry and its key competitive advantage. After all, you think the UK government could borrow a penny without the City to buy and distribute its bonds?
  2. Jan 27, 2012
    #42

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    Who is there to buy our goods when all other economies are struggling, and that is the point - no matter the approach countries are taking in the western world none of us are doing particularly well whether we are cutting spending quickly or maintaining a large deficit, or have no deficit at all.
  3. Jan 28, 2012
    #43

    Don't Kill Bill Full Member

    Joined:
    May 14, 2006
    Messages:
    3,123
    I thought the idea was to push down the numbers in the public services so that they can become productive in the private sector. That was your argument wasn't it?
  4. Jan 28, 2012
    #44

    Plechazunga Grammar partisan who sleeps with a real life Ryan

    Joined:
    May 5, 2003
    Messages:
    51,762
    Location:
    Where Albert Stubbins scored a diving header
    No-one I've read - not a single demand-side writer - is suggesting that spending doesn't need to be cut. Of course it does. The question is whether major cuts in the middle/immediate aftermath of a recession and a liquidity trap were the way to do it.

    As far as I can see, the evidence from the economies that have and haven't in this crisis strongly suggests that it's not, and that when done at the same time as Keynesian borrowing and investment it blunts the effectiveness of that.

    As for the size of our economy, well it's the 6th/7th biggest in the world. Naturally it's dwarfed by nations and blocs of nations many times our size.
  5. Jan 29, 2012
    #45

    peterstorey Specialist In Failure

    Joined:
    Nov 16, 2002
    Messages:
    33,330
    Location:
    Ozil to the Arsenal
    Nope, we could feck over the 'big' man for a change.
  6. Jan 29, 2012
    #46

    Plechazunga Grammar partisan who sleeps with a real life Ryan

    Joined:
    May 5, 2003
    Messages:
    51,762
    Location:
    Where Albert Stubbins scored a diving header
    [​IMG]
  7. Jan 29, 2012
    #47

    shaydun Full Member

    Joined:
    Jul 24, 2008
    Messages:
    1,227
    Location:
    Ireland
    Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com
  8. Jan 29, 2012
    #48

    Fiskey Can't stop thinking about David Nugent's hot naked

    Joined:
    Oct 12, 2009
    Messages:
    3,357
    Location:
    Oxford
    This article gives a fairly good argument as to why the government is one the right course, just click the top link.

    a.alesina 2010 - Google Search
  9. Jan 30, 2012
    #49

    peterstorey Specialist In Failure

    Joined:
    Nov 16, 2002
    Messages:
    33,330
    Location:
    Ozil to the Arsenal
    'The IMF has reviewed the work by Alesina and comes to the opposite conclusion, namely (in keeping with Keynes) that fiscal contraction makes things worse.
    First, some of the outcomes examined by Alesina involve fiscal shrinkage in a downturn which is ‘built in’, i.e. not a matter of deliberate policy (or ‘policy driven’). The IMF study looks only at policy driven cases, and finds only two cases (Denmark, 1983; Ireland, 1987) which support Alesina’s thesis.
    The IMF concludes:
    Fiscal consolidation typically has a contractionary effect on output. A fiscal consolidation equal to 1 percent of GDP typically reduces GDP by about 0.5 percent within two years and raises the unemployment rate by about 0.3 percentage point. Domestic demand – consumption and investment – falls by about 1 percent'.
  10. Jan 30, 2012
    #50

    MikeUpNorth Wobbles like a massive pair of tits

    Joined:
    Apr 26, 2007
    Messages:
    15,240
    No shit.
  11. Jan 30, 2012
    #51

    Fiskey Can't stop thinking about David Nugent's hot naked

    Joined:
    Oct 12, 2009
    Messages:
    3,357
    Location:
    Oxford
    That's just another opinion from another academic, even if he/she works for the IMF instead of Harvard. Its a debate that is still to be proven, as is pretty much every debate in economics, instinctively I side with the more right wing theorists, but I really think its still up in the air.
  12. Jan 30, 2012
    #52

    peterstorey Specialist In Failure

    Joined:
    Nov 16, 2002
    Messages:
    33,330
    Location:
    Ozil to the Arsenal
    Indeed, but you presented Alesina as if it was a proven justification for Tory policy.
  13. Jan 30, 2012
    #53

    Fiskey Can't stop thinking about David Nugent's hot naked

    Joined:
    Oct 12, 2009
    Messages:
    3,357
    Location:
    Oxford
    Think that's slightly misrepresenting what I said?
  14. Feb 3, 2012
    #54

    MikeUpNorth Wobbles like a massive pair of tits

    Joined:
    Apr 26, 2007
    Messages:
    15,240
    New Statesman - The verdict is in – the Chancellor’s austerity measures have failed
  15. Feb 4, 2012
    #55

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    The Americans are going to have to start cutting dramatically and in the not too distant future unless they want their national debt to become ridiculous in scope and scale.

    And as I have now been saying since the beginning of time you cannot compare us to the Americans, they have the largest economy in the world and the reserve currency of the world - they can stare the rest of the world down on such an argument like nobody else is able to. The UK cannot do that, and what is more we are heavily tied into the fate of the Eurozone - the threat of defaults on the continent is a valid point as we were looking far stronger than we are now as late as September when that began kicking off in a big way. When half of your trade with Europe and Europe is in crisis you are not going to escape it yourself like Canada has not been able to escape this firestorm despite having the soundest financial sector as 75% or so of their trade is with the Americans.
  16. Feb 4, 2012
    #56

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    It was only in the third quarter that our growth was 0.6% before we began stumbling from summit to summit about saving the Eurozone in the Autumn.

    Over the last seven days it has been reported that manufacturing output rose sharply in January which in Q4 was one of the big reasons for the fall whilst in the last 24 hours whilst everybody has been recording increased growth in the all-dominating services sector. People try and say it is the Conservatives who talk the economy down but it isn't they who beat the drum about recession at every possible opportunity, people hear recession and they think 2008-9 which wasn't so much a recession but a fall off a cliff which affects their buying and spending behaviour.
  17. Feb 4, 2012
    #57

    Stanley Road I.C.F. Member

    Joined:
    Feb 19, 2001
    Messages:
    29,118
    Location:
    Austerity does not exsist
    So it's all working as planned then Boris?

    Yes or No?
  18. Feb 4, 2012
    #58

    Don't Kill Bill Full Member

    Joined:
    May 14, 2006
    Messages:
    3,123
    Brian is the one who says not to focus on one statistic when it goes against his argument but never mind, lets quote some report that one statistic might be showing some positive trend. That clearly answers the main accusation that our recovery was smothered at birth and that there is clear evidence that we are still deeply in the poo when in fact we could have been growing. It amazes me that you do this over and over. All the things the conservatives said wouldn't happen, have happened. Whereas all the things they assured us would happen, haven't happened.

    Where are all the private sector jobs we were promised would be available to take up the slack? Oh and the real kick in the teeth is that the books we were supposed to be balancing will still be in deficit because we couldn't be a little more patient, couldn't wait longer to allow us to recover from the blow to confidence that the financial collapse delivered.

    I always hoped I was on the wrong side of this debate and still do with regards to the strength and timing of the recovery.
  19. Feb 4, 2012
    #59

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    The economy continues to recover, our deficit is coming down quickly, our banks are returning to health, only last month individuals payed down more credit card debt than in any one month since records began.

    The simple fact of the matter is the world economy remains very turbulent, events in Europe I believe have vindicated the government's position. The primary argument put forward in support of the spending review was to prevent the national debt from overwhelming public spending, and to prevent the burden of it costing the taxpayer too much revenue. To me, the biggest argument in support of it was to run down the deficit as quickly as possible to prevent it becoming a noose around our necks should a second economic crisis in recent years come our way. If there was a banking crisis in the Eurozone the severe loss in confidence worldwide would hit our banks and would likely prevent the government from being able to sell its debt as the deficit balloons in response to a severe downturn. If our public spending was balanced or near balanced we would be able to weather such a storm but we couldn't if we had a deficit that was overtly large.

    That is why I opposed Labour's plans, to run a deficit in such times is incredibly dangerous and presents a significant threat to our economic vitality - if it works it results in a couple of additional points of economic growth but if it fails it leads to systemic devastation, it is not responsible to take such risks with our long-time future to satisfy the short-term urgings of the left.
  20. Feb 4, 2012
    #60

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    The Private sector is recovering and continues to add jobs but not at a rate that we would like though I'll also add that according to numerous reports public sector cutbacks are taking place more quickly than was advertised.

    Another point I ought to have made in my earlier post is that you cannot look at the very recent upturn in the US and say that could be us. Afterall the Americans were jumping up and down in the summer worrying about a further downturn when our economy was coming along nicely as it did in Q2 and Q3.

    It is much more sensible to look to Europe than the US because our economy is not just more aligned to European countries but it is more similar to theirs in balance between public and private sector, levels of public spending, levels of living standards etc. Plus of course the Eurozone has 17 nations in it as opposed to comparing us with just the one.

    Personally I think the Government, and I, were too optimistic in our hopes for a quick recovery which doesn't tally with the enormity of what hit the world and the restructuring that is required. It might just be that stagnation is the best we could have gotten right now which is likely to be accurate considering the world around us which we cannot act in isolation from.

    The one thing that has been proven over the last five years is what a guessing game growth forecast can be which has been out on so many occasions for better or worse - in their recent forecast in the last three months the OBR and the BoE appear to be in agreement that despite their downgrading of our prospects in the immediate future, growth in 2-5 years from now will be 'above trend' as I recall Mervyn King saying.

    Though as the rule book with regard to economic experience across the world is being rewritten right now so you have to take whatever anybody says good or bad with a skip of salt though it remains my fervent belief that we are doing the right things moving onward.
  21. Feb 4, 2012
    #61

    Stanley Road I.C.F. Member

    Joined:
    Feb 19, 2001
    Messages:
    29,118
    Location:
    Austerity does not exsist
    Thats because he is a politician and all his posts sound like they've been written by one

    It's annoying when people use stats for an argument as they will always find a stat that backs their case up, confirmation bias if you like

    If Europe recovers and UK doesn't we'll see what argument Brian finds then
  22. Feb 4, 2012
    #62

    712 Formerly '711' but that was a ridiculous username!

    Joined:
    Dec 10, 2007
    Messages:
    10,665
    The economy does not continue to recover, gdp fell again during the last quarter and we are in recession.

    The deficit is not coming down even slowly, never mind quickly. It rose in the last quarter.

    Your argument would carry more weight if you stuck to the stats that do back you up instead of repeating things over and over again that are just plain not true.
  23. Feb 4, 2012
    #63

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    There is more to the economy recovering that GDP growth - levels of indebtedness public and private, the rate of money supply, the health and integrity of our banks, the inflation rate, our trade balance etc. GDP slipped backwards in the last quarter but the balance of our economic data has been gradually improving over the last 12-18 months.
  24. Feb 4, 2012
    #64

    bsc Full Member

    Joined:
    Sep 13, 2010
    Messages:
    6,704
    Location:
    Stretford End - 3103
    Like the national debt rising above £1tn for the first time and borrowing targets already £158bn off track.

    Splendid.
  25. Feb 4, 2012
    #65

    Team Brian GB Baby Cameron loves X-Factor

    Joined:
    Jan 11, 2008
    Messages:
    16,249
    What makes me laugh about that is Labour complain about it but the finances under them would be worse off as they would be cutting spending much more slowly.

    Our national debt was always going to rise beyond £1 trillion once the Government came in and it will rise further beyond that.
  26. Feb 4, 2012
    #66

    bsc Full Member

    Joined:
    Sep 13, 2010
    Messages:
    6,704
    Location:
    Stretford End - 3103
    Blah, blah, blah.

    Blame Labour, the snow, Royal wedding, Europe. People are growing tired of excuses; as time goes on and things continue to deteriorate, the anyone but us schtick wears thinner and thinner. Conservative spads like yourself will have to work harder and harder sooner than you know.

    Ed even looks competent on the economy in PMQs recently. Even Gideon looked uncomfortable last week.
  27. Feb 4, 2012
    #67

    Agent Red Full Member

    Joined:
    Apr 26, 2011
    Messages:
    6,206
    TBGB, are you in politics? Are there any issues on which you deviate from party line?
  28. Feb 4, 2012
    #68

    bsc Full Member

    Joined:
    Sep 13, 2010
    Messages:
    6,704
    Location:
    Stretford End - 3103
    He's too articulate and intelligent to be a CCHQ internet/forum spambot...clearly a spad.

    I disagree with just about everything he says and stands for, but perversely he's one of my favourite posters on here.

    Deciphering his right wing propaganda is fun.
  29. Feb 4, 2012
    #69

    Agent Red Full Member

    Joined:
    Apr 26, 2011
    Messages:
    6,206
    I disagree with the vast majority of his views, but I do appreciate that he is a good poster in the sense that he backs them up rather than coming in here and making sweeping generalisations. He's also never rude, which is not the case for some of the other more politically tribal posters on here.

    His stats are sometimes a little selective though, and I don't think I've ever seen him deviate from party line, which is unusual. Quite young to be a spad though.
  30. Feb 4, 2012
    #70

    Stanley Road I.C.F. Member

    Joined:
    Feb 19, 2001
    Messages:
    29,118
    Location:
    Austerity does not exsist
    Always the victims, it's never their fault

    Thats what comes across in all of Boris' posts, however articulate they may be
  31. Feb 6, 2012
    #71

    Plechazunga Grammar partisan who sleeps with a real life Ryan

    Joined:
    May 5, 2003
    Messages:
    51,762
    Location:
    Where Albert Stubbins scored a diving header
    And behold, the Great Backtrack begins.

    Stimulus, austerity and the weltgeist

    The Economist
    Feb 1st 2012, 15:05 by M.S.

    BEFORE his big speech last week, liberals advised Barack Obama to stay away from arguing about the merits of the American Recovery and Reinvestment Act (ie, the stimulus bill of 2009). While independent economists generally agree that the stimulus saved or created somewhere in the neighbourhood of 2m jobs, it remains unpopular with the general public; the sense was that there was no point engaging on this issue, regardless of the merits. Now ProPublica's Mike Grabell is out with a book-length investigation of the stimulus, titled "Money Well Spent?"

    In an interview last week on NPR's Fresh Air, Mr Grabell said the stimulus effort had its good points and its bad points. On the one hand, money funneled to states to forestall budget cuts saved huge numbers of jobs for teachers, firefighters and other employees, and delayed cutbacks in infrastructure spending. He subscribes to the general wisdom that unemployment probably would have hit 12% in 2009 rather than 10% without it. On the other hand, the administration had to drop an idea that almost certainly would have made sense—building a national electric smart grid—because the jurisdictional and red-tape problems made it impossible to implement fast enough. Instead the administration decided to invest in clean energy; but those investments placed their bets too heavily on individual companies, some of which then went bankrupt. In an excerpt from the book on the electric car and battery industry jump-started by stimulus funding, Mr Grabell says the jury is still out: without a rapid pickup in demand for Leafs and Volts (which in turn depends on a big increase in electric charging stations), America's electric-car industry will probably fail to hit critical mass, and it'll wind up relocating to South Korea or China like every other manufacturing industry has.

    So, here's the thing. The debate we had about the stimulus probably should have been a lot like the book Mr Grabell has written: a detailed investigation of what does and doesn't work in stimulus spending and whether the government really can jump-start a promising industry through investments, tax breaks and industrial policy. But that wasn't the debate we had. Instead we had a debate about the very concept of whether the government ought to spend money counter-cyclically during a recession in order to keep the economy from collapsing, or whether it should tighten its belt along with consumers and businesses in order to generate confidence in the financial markets and allow markets to clear. We had a debate about whether governments should respond to recessions with deficit spending or austerity.

    That was the debate we had. And what's interesting about this particular moment is that while Mr Grabell is writing about what did and didn't work in the stimulus, and Mr Obama is staying away from the topic for political reasons, out there on the barricades what's happening is that the entire argument that governments should engage in austerity appears to be collapsing.

    Item 1: Over the past month, Paul Krugman, Brad DeLong, and Simon Wren-Lewis engaged in an interminable duel with Tyler Cowen, Scott Sumner, sort-of Karl Smith (occupying as usual an esoteric position not easily placed on the ideological grid), and probably some other people I'm forgetting—over an old argument by John Cochrane claiming that the multiplier effect of government stimulus spending probably ought to be zero. The argument by Mr Cochrane was a critical document in the stimulus debate, because it was an articulation in more-or-less public discourse by a well-respected economist of a mechanism through which increased government spending could fail to raise GDP or increase employment at all. Essentially every working practical economist and forecaster believed that the stimulus, like any other government spending, would raise aggregate demand, GDP, and employment. Republican politicians were arguing that it would not, and Mr Cochrane backed them up.

    Two weeks ago, Mr Cochrane responded to the argument in a fashion that suggested that either he has changed his mind, or he never thought what the expansionary-austerity people claimed he did in the first place.

    Let's be clear what the "fiscal stimulus" argument is and is not about.It is not about the proposition that governments should run deficits in recessions. They should, for simple tax-smoothing, consumption-smoothing, and social-insurance reasons, just as governments should finance wars with debt. That doesn't justify all deficits—one can still argue that our government used the recession to radically increase permanent spending. But disliking "stimulus" is not the same thing as calling for an annually balanced budget.Nor is it about debt financing of "infrastructure" or other genuine investments. If the project is valuable, do it. And recessions, with low interest rates and available workers, are good times to do it... Stimulus [is] still an economically interesting proposition, and there is a great deal of uncertainty about whether, when, and how well it might work.

    Okay. There's a lot of nuance here. But as Noah Smith pointed out in response, if the basic gist is that governments should run deficits in recessions to smooth consumption, deliver social insurance, and take advantage of low interest rates to invest in infrastructure...then the policies Mr Cochrane is recommending here are to the left of anything Congress is contemplating passing right now.

    Item 2: Niall Ferguson has spent the last three years arguing, contra Paul Krugman, that America is courting disaster by allowing deficits to balloon its national debt to such high levels, and will have to reign in spending or face a crippling rise in interest rates. Last week, in an interview with Henry Blodget, he admitted defeat.

    BLODGET: That is a shockingly optimistic view of the United States from you. Are you conceding to Paul Krugman that over the near-term we shouldn't worry so much?
    FERGUSON: I think the issue here got a little confused, because Krugman wanted to portray me as a proponent of instant austerity, which I never was. My argument was that over ten years you have to have some credible plan to get back to fiscal balance because at some point you lose your credibility because on the present path, Congressional Budget Office figures make it clear, with every year the share of Federal tax revenues going to interest payments rises, there is a point after which it's no longer credible. But I didn't think that point was going to be this year or next year. I think the trend of nominal rates in the crisis has been the trend that he forecasted. And you know, I have to concede that.

    I could go on. This comes on top of criticisms of austerity policies from the IMF, intense pressure at Davos on the German government to countenance increased spending by northern European countries and looser monetary policy at the ECB, and so forth. To some extent what we're seeing here is the backwash from the euro-zone crisis hitting the American economic debate. If you think that the German-led European solution to the euro-zone crisis is deeply confused, and a lot of Americans do, then you have to be troubled by the ways in which it resembles what austerity proponents would have liked America's response to the financial crisis to have been. Americans are starting to recognise that our recovery is further along than other advanced countries' in part because the way we handled the financial crisis wasn't really so awful. And that includes the stimulus.

    The presidential election this year is in large measure a referendum on Barack Obama's economic policies. In the broad terms in which it is seen by the electorate, it's a debate over Keynesian deficit spending versus expansionary austerity. The 2010 elections took place at a moment when people seemed to have lost faith in Keynesianism. The 2012 elections are taking place at a moment when people have lost faith in expansionary austerity.
  32. Feb 6, 2012
    #72

    MikeUpNorth Wobbles like a massive pair of tits

    Joined:
    Apr 26, 2007
    Messages:
    15,240
    The Economist have been pretty woeful throughout the recovery period. Right-wing idealism over economic pragmatism.
  33. Feb 6, 2012
    #73

    Plechazunga Grammar partisan who sleeps with a real life Ryan

    Joined:
    May 5, 2003
    Messages:
    51,762
    Location:
    Where Albert Stubbins scored a diving header
    Less so the online version though, they have more of a variety of voices
  34. Feb 6, 2012
    #74

    Fiskey Can't stop thinking about David Nugent's hot naked

    Joined:
    Oct 12, 2009
    Messages:
    3,357
    Location:
    Oxford
    Thought I'd copy in the blog from my current economics lecturer. He's not in favour of austerity, believing that fiscal stimulus in this time would help and makes fairly convincing arguments.

    mainly macro
  35. Feb 6, 2012
    #75

    MikeUpNorth Wobbles like a massive pair of tits

    Joined:
    Apr 26, 2007
    Messages:
    15,240
    Very interesting blog.

    This is a key point: "We have an asymmetry of risks. If fiscal policy is too expansionary, we have monetary policy as a fall back. However, because of the zero bound for interest rates and uncertainty over the effectiveness of Quantitative Easing, we do not have a similar insurance policy if fiscal policy is tightened too quickly."
  36. Feb 10, 2012
    #76

    evra Full Member

    Joined:
    Nov 27, 2009
    Messages:
    9,586
    Location:
    Bitten by an adder as a baby, the adder died.
  37. Feb 15, 2012
    #77

    bsc Full Member

    Joined:
    Sep 13, 2010
    Messages:
    6,704
    Location:
    Stretford End - 3103
  38. Feb 15, 2012
    #78

    Tibs Full Member

    Joined:
    Aug 16, 2007
    Messages:
    11,041
    Location:
    Gtr. Manchester
    Ah
  39. Feb 17, 2012
    #79

    SteveJ all-round nice guy

    Joined:
    Oct 22, 2010
    Messages:
    31,117
    Location:
    'From tractor parts to radioactive nuns'
    Disabled people face unlimited unpaid work or cuts in benefit | The Guardian


    Housing benefit cap forces families to leave central London or be homeless | The Guardian
  40. Feb 17, 2012
    #80

    evra Full Member

    Joined:
    Nov 27, 2009
    Messages:
    9,586
    Location:
    Bitten by an adder as a baby, the adder died.
    Where do the Guardian think we should cut costs then? I suppose their solution is to increase our borrowing further, lose the confidence of the market and spiral into disaster. This idea that working people should have to pay for the unemployed / low paid to live in accomodation that could well be superior to their own was always absurd.

    I feel sorry for people who have to relocate and face upheaval, but the free ride had to end at some point. It's not like poeple are being tossed on to the street, they will still be able to afford habitable accomodation. I'm sure this is an unpopular policy on this forum but out in the real world I haven't spoken to a single person who's opposed to this policy.

Share This Page