"April is the cruellest month"

[Tangled up in Blue]

Is this what's in store for us?

http://www.guardian.co.uk/business/2013/apr/04/japan-bank-money-supply-inflation-deflation

"Answering concerns that the stimulus programme would further raise Japan's public debt, the statement said that the government bond purchases would be "executed for the purpose of conducting monetary policy and not for the purpose of financing fiscal deficits"

I wonder, though it must be a posssibility.Japan's economy, of course, has been flatlining for a decade now.

 

[superblue24]

Obviously not.
Nevertheless both wars were (and still are, at least with respect to Afghanistan),a significant drain on GB's financial resources.

Please try to see the bigger picure where analogies are being drawn, rather than taking such statements literally.

Idiot.

You've missed Neil's point entirely here and then trying to belittle me for taking you literally, you utter plum!

Read what Neil says again and try to understand the words this time.

In 1945 GDP had collapsed. You'll note that virtually the entire working population left their jobs to fight for the survival of the nation. Here is some simple maths: 1/2 = 50% and 1/1 = 100%. There are two contributory factors to a percentage.

How many left their jobs against their will to fight in Iraq and Afghanistan?

 

[Tangled up in Blue]

Idiot.

You've missed Neil's point entirely here and then trying to chastise me for taking you literally, you utter plum!

Read what Neil says again and try to understand the words this time.





How many left their jobs against their will to fight in Iraq and Afghanistan?

No,actually you've missed the point entirely (and not for the first time either).What was the effect on the economy is the point and not how many people were in uniform.

Allow me to repeat the figures for debt as a % of GDP (given in a recent Newsnight programme).

2012.82% 1946.200%

The further point is that even large debts can be paid off-over time-as was Britain's WW2 debt, eventually.

Incidentally,for Neil to claim that

virtually the entire working population left their jobs to fight for the survival of the nation.

is preposterous.
I imagine you've heard of total warfare?
How many people do you think were still in reserved occupations -miners,munitions workers,farmers etc. A significant proportion of the working population would have to be the answer.

 

[Neil_F]

No,actually you've missed the point entirely (and not for the first time either).What was the effect on the economy is the point and not how many people were in uniform.

Sorry, Barna, I'm afraid the effect on the economy was driven by conscription. 8,000,000 men were conscripted. Granted some of them were in reserved industries as you pointed out, and I did say earlier that there was a degree of replacement through women entering the workforce. However, GDP in the period would have substantially reduced during the five year period. I've tried to find the actual stats but there aren't any, presumably because people had more pressing things to do than collect economic statistics, such as fighting fascism.

This was my earlier point about statistics. The net debt to GDP ratio jumped because of two components: the increased borrowing to fund the war and the collapse in GDP due to labour being diverted to killing people (which doesn't add much to GDP). The net debt to GDP ratio at 1945 is therefore over-represented because the labour force is then re-directed to value added work rather than killing people. You'll notice that net debt to GDP continues to rise for a couple of years, which is the post-war reconstruction loan. From 1946 to 1950 GDP increased by nearly 40%. Net debt to GDP ratio began to plummet from about 1947/8 as GDP recovered quickly as a result of the spare capacity in the economy.

This is why I think the comparison with Iraq and Afghanistan is a false one. The fighting has been limited to the existing armed forces and there has been no conscription of other labour. You can argue about reserves and perhaps some people signed up to fight who would otherwise have done something else but I think that is at the margins. The comparison is invalid because the main engines of GDP continued as they were throughout those conflicts so it did not have any impact on GDP.

Iraq and Afghanistan has cost the taxpayer £18bn over a twelve year period. The annual budget for the department of transport is £19bn. I've no idea how much WWII cost but I'd bet my house it was more than £18bn in real terms.

On your basic point, Barna - that net debt to GDP has been much worse before so we don't have to worry about the deficit - I think it is an error to draw that conclusion. The statistics aside, the economy was always going to rapidly recover after the war and public spending fell such that the government was running a surplus and not a deficit. The combination of reconstruction and raising more money than was spent meant that the long-term debt issue was not a problem.

Contrast that with now: there is no rapid recovery to take place for the reasons that I already explained. We are still running a huge deficit so have to borrow more and don't seem to be able to reduce this. In 1945 the economic prospects were good, in 2013 they are not. Debt is the symptom of the problem in 2013 whereas debt in 1945 was the legacy of defeating Hitler.

 

[Tangled up in Blue]

On your basic point, Barna - that net debt to GDP has been much worse before so we don't have to worry about the deficit - I think it is an error to draw that conclusion.

I'm glad you've grasped the basic point.However, I've never said (or even implied) that we don't have to worry about the deficit.We do and we should.

Contrast that with now: there is no rapid recovery to take place for the reasons that I already explained. We are still running a huge deficit so have to borrow more and don't seem to be able to reduce this.

Given that the present Government's plans to reduce the deficit have clearly stalled (after an impressive start) the key question now (it seems to me) is how to inject growth into the economy? This would clearly be the best and most efficient way to deal with the current increase in debt.

 

[Neil_F]

the key question now (it seems to me) is how to inject growth into the economy? This would clearly be the best and most efficient way to deal with the current increase in debt.

No, it would be the best way to deal with the net debt to GDP ratio. The absolute debt stock, and so the debt interest payments, would continue to rise.

 

[superblue24]

Actually, it's an MA in TESOL.

I hope that English is the only thing you teach them!

 

[Tangled up in Blue]

I hope that English is the only thing you teach them!

FYI,I also teach quite a bit of Business English in companies and in private classes.In addition (until last June) I also taught a regular class in presentation skills at the UAB.

 

[Yorkshire Blue]

FYI,I also teach quite a bit of Business English in companies and in private classes.In addition (until last June) I also taught a regular class in presentation skills at the UAB.

RIP the Spanish economy.

 

[Tangled up in Blue]

No, it would be the best way to deal with the net debt to GDP ratio. The absolute debt stock, and so the debt interest payments, would continue to rise.

I imagine you'd accept that injecting growth into the UK economy would be the easiest (and least painless) way of reducing the structural deficit though?

 

[Tangled up in Blue]

RIP the Spanish economy.

Perhaps you could outline your own significant contribution to reinvigorating the UK's economy? :unsure:

 

[Neil_F]

I imagine you'd accept that injecting growth into the UK economy would be the easiest (and least painless) way of reducing the structural deficit though?

I absolutely would not. The structural deficit is the difference between government spending and receipts that cannot be accounted for by short-term factors. In other words, even if the economy were running at full tilt, the government would still be spending more than it brought in, with that amount being the structural deficit.

You are thinking of the cyclical deficit, which is the overspend atrributable to short-term factors, such as growth below trend growth.

structural deficit + cyclical deficit = total deficit.

The only way to close the structural deficit is to spend less, raise more or do a combination of both. Growth measures would not have any impact at all.

 

[Yorkshire Blue]

Perhaps you could outline your own significant contribution to reinvigorating the UK's economy?

Well for starters on Tuesday I reduced next month's unemployment figures by one (subject to references).....

 

[Tangled up in Blue]

Well for starters on Tuesday I reduced next month's unemployment figures by one (subject to references).....

I await with baited breath for the next thrilling instalment of your singlehanded attempts to micromanage the British economy out of recession.

 

[Tangled up in Blue]

Contrast that with now: there is no rapid recovery to take place for the reasons that I already explained. We are still running a huge deficit so have to borrow more and don't seem to be able to reduce this. In 1945 the economic prospects were good, in 2013 they are not. Debt is the symptom of the problem in 2013 whereas debt in 1945 was the legacy of defeating Hitler.

Britain is not broke (historically speaking at least).There are sufficient funds,which should be made available to finance large-scale infrastructure projects and government spending on investment now.
Here's the proof.

http://www.guardian.co.uk/commentisfree/2013/apr/04/britain-not-broke

" advocates of austerity suggest Britain is broke because the cost of servicing debt is bankrupting us. However, UK debt interest payments are now actually lower as a share of GDP than at any point up to the year 2000. So if this is the yardstick for being "broke", Britain has also been broke over the whole second half of the 20th century."


"Britain, then, is not "broke" – in any historical terms, it is ludicrous to claim that. As for Britain not being able to afford to invest, the truth is the exact opposite: with the cost of borrowing at historic lows, Britain cannot afford not to invest. As in the 1930s, George Osborne's "sound money" philosophy is distinctly unsound economics."

 

[Holy Joe]

Britain is not broke (historically speaking at least).There are sufficient funds,which should be made available to finance large-scale infrastructure projects and government spending on investment now.
Here's the proof.

http://www.guardian.co.uk/commentisfree/2013/apr/04/britain-not-broke

" advocates of austerity suggest Britain is broke because the cost of servicing debt is bankrupting us. However, UK debt interest payments are now actually lower as a share of GDP than at any point up to the year 2000. So if this is the yardstick for being "broke", Britain has also been broke over the whole second half of the 20th century."


"Britain, then, is not "broke" – in any historical terms, it is ludicrous to claim that. As for Britain not being able to afford to invest, the truth is the exact opposite: with the cost of borrowing at historic lows, Britain cannot afford not to invest. As in the 1930s, George Osborne's "sound money" philosophy is distinctly unsound economics."

Arguably borrowing costs are only low because the market believes the government will stick to an austerity plan. As soon as that plan is abandoned borrowing costs will rise.

 

[Neil_F]

Britain is not broke (historically speaking at least).There are sufficient funds,which should be made available to finance large-scale infrastructure projects and government spending on investment now.
Here's the proof.

You really do amze me, Barna. Your basic approach is to make a point, which is then roundly demonstrated to be invalid by all, then setup a straw man and argue against it as though that was always the topic of discussion. No one on this thread has said that Britain is broke.

I also find your assessment of "proof" hilarious. Try presenting a Guardian article in your defence before a judge. On that subject, the authors of that article have a distinctly vested interest in arguing for higher government spending becausr the New Economics Foundation and Tax Justice Network indirectly receive funding from the government (via the unions). Why is that conflict of interest never declared in these articles?

On the substance, I'm not arguing that Britain is "broke." I was arguing againast your contention that parallels could be drawn between the economics of 1945 and 2008.

Could we borrow more now to invest in infastructure? Probably yes. Market conditions have changed since 2010 when any country showing any signs of fiscal recklessness was punished with a run on bond prices. Markets are less concerned than they were on that issue so there is probably more scope to increase borrowing slightly if it were for infastructure investment, not revenue spending such as higher welfare payments. Alternatively it would be possible to increase capital spending without borrowing more by reducing current spending even further.

However, there are two problems with this approach, both of which we have been over before. Your approach here is incredibly simplistic, Barna. You think we should borrow more, pay people to dig holes and fill them in and all will be well. The example of Japan, which you linked to yesterday, shows that infastructure investment doesn't lead to GDP growth if the infastructure is of no economic benefit. Digging holes and filling them in very much meets that criteria. Japan also has miles of roads and numerous bridges that no one uses.

The second problem, assuming you can find a useful project to invest in, is that the planning system and right of appeal through the courts makes it difficult to start anything within five years. Rapidly increasing house building is all but impossible given the planning restrictions and local opposition; HS2 has been dragged through the courts for years, a new airport or expansion of Heathrow would definitely add GDP but politicis stands in the way.

The government has 150 infastructure projects that are marked as a priority. I think the list was put together in 2008. I believe less than 10 of those have been started and finding the capital was not the problem.

 

[Tangled up in Blue]

On the substance, I'm not arguing that Britain is "broke." I was arguing againast your contention that parallels could be drawn between the economics of 1945 and 2008.


Not the economics but the economies.Not the same thing at all.

You think we should borrow more, pay people to dig holes and fill them in and all will be well. The example of Japan, which you linked to yesterday, shows that infastructure investment doesn't lead to GDP growth if the infastructure is of no economic benefit. Digging holes and filling them in very much meets that criteria. Japan also has miles of roads and numerous bridges that no one uses.

The "digging holes and filling them in" again suggestion was very much a Kenysian joke (as I imagine you know full well).It was never meant to be taken seriously.

 

[Hotman]

#barnabluegetsitwrongagain

 

[steveo]

Well for starters on Tuesday I reduced next month's unemployment figures by one (subject to references).....

Good work YB, good work.