The immaculate recession

So the Treasury appear to support GB as he clearly did end the boom and bust cycle as there was no boom! To paraphrase E George better to have boom and bust than no boom and just bust.

In addition the absence of any effective regulation of the finance sector fiddling with base interest by some geeky MPC to manage a modern technologically complex economy is absurd and Labour will probably endure many years of opposition because it chose to exhume the Adam Smith view of economics.

There is another possibility, which is that there is no constant "trend" growth rate, and that for many years we have overestimated the potential of our economy to continue to grow. If you do a rough plot of annual growth rates since the 1970s, they do seem to have fallen steadily across the developed world. It may be that we have already invented and installed most of the easy technology, and each innovative step from here on will be harder than the last. If true, this wouldn't mean that we are all doomed, just that we should lower our expectations about future growth! Life in the developed world is pretty comfortable anyway.

but thats what Brown did say "we have abolsihed boom and bust"
So we have two views

1) HMG GB got it all right and its not his fault

2) HMG GB got it all wrong and its all his fault

His profligate spending plans to sovietise the UK are the real cause as he needed tax reciepts from a booming city to finance it other wise there
would be large tax and borrowing, just have we have now.

He did nothing to sort out the structura issues that the UK faced and faces today.

Trying to re-write history before its even passed seems to be whats going on

Excellent blog that gets to the heart of the issue. Personally, I believe scenario 2 is true but if I'm a politician, I would prefer scenario 1. Irrational exuberance is all about believing 'things are different this time'. If this also fits with what you would like to believe for political purposes then you have a problem - you spend beyond your means and this catches up with you in the end. Perhaps economic policy is too important to leave to politicians? Instead governments should set a 'policy of stability' and let independants work out how to achieve this. They then tell the government how much they can spend depnding on all the economic factors, putting pressure to cut & save cash when we are 'booming' and also spend when we need to. Not an end to boom and bust I'm sure (some boom and bust may be good for 'efficiency' but unpleasant if you are at the sharp end) but perhaps may take the extremes off both ends of the cycle.

Unfortunately, the marginal productivity of debt in Britain and the USA has been less than 1 for quite some time. But no-one seemed to notice this.

In 2006, the marginal productivity of debt actually fell below zero for the first time. In other words, borrowing GBP 1,000 led to an increase in productivity of only GBP 900. This meant the borrower only had GBP 900 of additional profits from which to repay the loan of GBP 1,000
This caused the borrower's profits to shrink. Eventually, many borrowers within the economy as a whole found they didn’t have enough money to repay their loans....
This caused lenders to suffer bad debts.

This is why we now find ourselves in a global slump. The debts of Britain and the USA outweigh the productivity of our economies. This is causing our economies to shrink.

Anyone who worked in manufacturing through the last three decades will have experienced the very large gains in productivity that were obtained by "lean production". While there is always room for further improvement, there was a very big one-off gain here. Similar one-off gains were experienced when overmanned industries were privatised; a clear example is power stations that run with one third the number of staff required under the CEGB. It is often forgotten that five years after the miners' strike 80% as much coal was being mined with 20% of the number of miners. In service industries, telephone and later internet banking have delivered similar productivity gains. Unless and until such approaches are applied in the public sector the scope for further economic growth can be expected to fall well below the trend of the last decades.

thescienceguy - good point about growth rates. All economies rely on growth - but will we run out of opportunities for this? I have enough 'stuff' already and only need to replace occasionally. The population is still growing but this can't go on forever - what happens then? Is there an economic model for zero growth/contraction that works? I don't think it would involve pensions/stock market investment growth and low interest rates would be then norm - too much cash around with not enough investment opportunities. What jobs would be left?? Perhaps a while off yet - I'm sure most politicians hope so!

I go with graph 2. Albeit in hindsight Labour pulled off the biggest con trick in history. By any analysis we now have a huge government burden which we cannot afford. Devolution = jobs for the boys. No coincidence that Scotland and Wales were Labour strong holds hence need extra government to manage. Who pays?

The Treasury continue to live in cloud cuckoo land if they believe we have not experienced a "boom" followed by a "bust".
Such a first could only happen in the world of "Browneconomics", where you dismantle regulation of the banking system from the experienced BoE and hand it to a novice and newly created Quango (FSA) with no financial experience amongst its newly "appointed" members. Then change the measurment of inflation to exclude the most expensive outlay in most housholds, housing costs. As Gordon has said in one of his "Treasury" moments of not understanding where it all went wrong, this is the first time a bust has happened when interest rates have been low. Hmm!! The penny still hasn't dropped.
If Gordon had allowed for the natural order of things we would have had a "bust" in 2001 after the "dot.com market collapse". This bust was not allowed to happen because Gordon initiated his Keynsian policy then, after 4 years of prudence he opened the flood gates on public spending and has never turned the taps off to this day. What! nobody noticed him doing this?
He didn't stop there he followed Alan Greenspan's model of internal growth through the housing market, there was to be no interference in reckless market behaviour that allowed lending to go to 6Xsalary (in some cases a mythical or grossly inflated salary figure), 125% the value of the property being bought. Once the rollercoaster ride was underway there was no desire to stop it, wars had to be paid for and elections (2005) had to be won.
No boom Eh!! wonder what the people who are losing their jobs and/or devalued houses, think of that pearl of wisdom from the "Font of Denial" previously known as the Treasury.

As well as having lessons for economic policy, I think that which of the two stories about past growth is true also influences our expectations of how quickly we grow again.

The rosy HMT view assumes a sharp turn around to trend growth, which is a reasonable assumption if all the loss in output is due to an exceptional external shock.

If, however, we are bust after a boom, then the turn back to trend growth is likely to be slower, as there will be more deadwood to clear out of the economy. In this (much more likely) view, a return to healthy growth as quickly as the HMT forecasts say is very unlikely. Which rather messes up the borrowing figures in the next few years.

It's clear that Brown et al wanted to prove a point even if the point was wrong. Many people (myself included) could see this coming as far back as 2004. If I and a few workmates could see it coming in the course of chatter at the coffee machine it is hard to believe that supposedly highly trained economists couldn't see it coming until it hit.

The trouble is the country is buried under so much debt that everything looks fine on the surface but there's no resilience left. Most people I know fall into one of two groups - either those in work who struggle to keep their heads above water (and who live basic lives because they can't afford any more) or those out of work who live very basic lives because it's all they can afford.

We're seeing what might be green shoots now, but just wait until the next snowfall finishes them off.

There was no boom according to the Treasury because they ignore asset price inflation!

The money came from and vanished into insane and unsupportable increases in the price of property and until and unless this is unwound there can be no recovery!

If you show a graph of house prices compared to salaries you will see the BOOM.

BUSTED INDEED

"In case you were wondering, it matters whether the Treasury economists are right on this one. If they are, Britain was hit by financial lightning toward the end of 2007, and now all we need to do is clean up the damage and carry on much as before."

Come on...

What we all know is that a lot of credit was given to a lot of people where the risk was securitized and insured on the basis that the insurance would noit have to be paid out. So long as we had continuous growth, those running the game thought the CDSs etc would not have to be paid. Once that myth was exposed, loans dried up and the jobs/production based upon the irresponsible loans (especially housing, student loans, and cars) started to disappear as they were premised on bad i.e unsustainable economics.

our politicized Civil Service is not going to be abe to talk their way out of this one, as the bottom line is that the loans can't be re-issued without great risk of default to the banks/public ...as I see it.

If you (Stephanie) or anyone else, knows better, I'm perfectly happy to be corrected as I'm sure many others will be.

The root of this, as I have said many times, lies in presentations like this being radically flawed/biased/ill-informed. The data at odds with what you hear here is ignored/suppressed. Flynn is a political scientist, and he is wrong (look closely into sampling and teaching to the test - the 'Flynn Effect' does not measure changes in 'g' which is highly heritable and envoronmentally immutable in terms of positive impact.).

The continuous economic growth fantasy relied upon what was essentially a still widely poorly understood 'Lysenkoist myth' being bought by large numbers of people who should really have known better. The predatory (loan) behaviour depended on this myth not being exposed.

If your reaction to any of this is defensive/negative, perhaps you should ask yourself why that is so....looking very closely to what is really happening in the USA as reported by Mason and Esler on the Obama Newsnight Special for example. Confidence (spin) is not all.

At some point, the make-up has to come off.

##11 I can think of another group.

Those that do not want to work they get equ to £25K in benifits for doing nothing, and they are quite happy with the life that they have.
do no aspire to much just sit about drinking cheap black market booze.
Do a bit of thieving etc and they are in paradice.


They have no incentive to go to work as they are given all that they want. if they were not given £25K in benifits things might be different.

where as other like myself work very very hard for a modist living and pay tax to support the £25k'er on the dole.

I can give you the post codes for these people but that would not be write and also get removed from the blog

The treasury are correct.

There was no boom as such, and measures taken over the last few months have stabilized the financialsystem. In due course these steps will allow a return to normality and rising house price with the return of securitization.

The recovery has already started with surging stock markets. House prices should start rising by the second quarter next year, just in time for the next election.

Its back to business as usual. the doomsters have been proved wrong!

When a household borrows money they are borrowing against their future income. A part of their future income goes to pay off the capital, and another part goes to pay off the interest.

When a government borrows money it is also borrowing against its future income. But a government doesn't produce anything so its only income is from taxation. Guess which way taxes are going to go to fund this profligate borrowing? Oddly enough the man who signed the loan agreement doesn't seem to see it.

#15 - I know these people exist, I just personally don't know any of them. I know one guy who is on benefits due to a number of issues and he doesn't get anything like that. He spends a lot of time juggling his budget to fit things in and isn't the chain-smoking, Sky TV-watching stereotype of benefits claimants.

LordGeenShoots (#16) "The recovery has already started with surging stock markets. House prices should start rising by the second quarter next year, just in time for the next election.

Its back to business as usual. the doomsters have been proved wrong!"

Drugs Counsellor:"Don't shoot-up, it'll just take over your life and you'll never be clean."

Junkie:"Listen you evangelical muppet - have you ever tried cold-turkey? - I only do this to avoid that!"

;-)

Very good LordGreenShoots, an excellent post that highlights the insanity of the Treasury's version of events! I especially enjoyed the bit about the return of securitization. Most amusing.

Stephanie,
In 2004 the BoE said " House proces have risen rapidly in recent years...the annual inflation rate in February 2004 was about 17%..There is little doubt that such rates of increase are unsustainable ( Olaf Weeken)". Converting inflation focus from RPI ( including housing costs) to CPI may have dislocated what was happening with housing wealth / cost from BoE targets in stability. But low inflation and stable interest rates ( whether low or not) could have perversely caused the boom. House price inflation could have caused consumption to dislocate itself from expectations of income growth. 'Stability' could have lessened the perceived need for precautionary saving by households which encouraged over consumption. Clever people in the BoE then thought the links between housing asset inflation and consumption were becoming less clear. I dont think that was right.Expectations of income growth might then have been surplanted with a view that house asset equity could provide the "get out of gaol" if things went wrong - promoting over consumption. Add sexy 'buy to let' investment schemes fuelling more credit demand and you could see where the boom was manufactured.

Add uncontrolled international securitisation and wholessale funding models to banking,shareholder growth demands,light-touch regulation, private equity buy-outs and hedge fund deals with cheap money from the east and you have a disaster. Surely, the BoE/Treasury are learning the lessons for the future. Booms aint growth!

6. At 10:19am on 01 May 2009, Forlornehope wrote:
"It is often forgotten that five years after the miners' strike 80% as much coal was being mined with 20% of the number of miners. In service industries, telephone and later internet banking have delivered similar productivity gains. Unless and until such approaches are applied in the public sector the scope for further economic growth can be expected to fall well below the trend of the last decades"
And the other 80% of miners, plus the bank clerks and switchboard/Directory Enquiries operators then did what exactly? How silly of me, it doesn't really matter does it, as long as they weren't a drag on more economic growth. A good early example of privatising the profits and socialising the losses.

#16 guess peers dont have to worry about how they are going to pay their debts then? At a time when most normal humans are worried about keeping their jobs, most are not going to rush back in to the housing market, ergo there will be no rises in the housing market in the forseeable future. IMHO it will be quite the opposite as people strugle to make repayments with rising unemployment and eventually rising interest rates.

There is a long way for this to play out.

#14 JadedJean:

One has to stand in awe of your ability to import your fixation with IQ into any discussion JJ! Still, your link was most interesting, and I think illustrates perfectly the dangers involved in basing arguments on an overly simplistic interpretation of IQ test data derived from disparate populations. Think about it (as you are fond of saying yourself).

Stephanie - a most interesting blog. I take it that there is no objective method of determining which interpretation of the data is 'correct'?

This is a nice academic argument that can be left to the economists in their university departments.

The real story is that the government failed to manage the economy properly for a variety of reasons, a proportion of senior managers in the banking industry were incompetent, and the inevitable happened. Anyone who questioned that the government was behaving properly was rhetorically beaten up and anyone in the banking industry who questioned his bosses was fired.

I don't think this is just a statistical issue but a cultural and a psychological issue. Or as Virgil once wrote `those whom the gods wish to destroy, they first make mad'. I wonder if my cast list is the same as that of the gods?

# 19 - think I know what you mean. But my view is obviously shared by the present UK government and US treasury, Why? All they keep talking about is 'the return of credit', getting back to the status-quo-ante, etc. In other words, they do not believe (at least in public) there was anything seriously wrong with the model of securitization, off balance sheet manipulation, house price inflation etc. Refusal to allow an updated Glass-Steagal or similar only confirms this. The gamble made is that the measures taken so far (recapitalization, QE, etc) will remedy the problem by returning things to 'normal' and this approach appears to be working for the markets!

Good grief how many times does it have to be said. We had a housing finance fed boom but it was riding on top of a declining economy. Massive treasury income relating to housing turned up in the public purse yet the economic growth rate was flat. If the economic growth was flat under those circumstances it is obvious that the underlying economic activity had to be in decline. Now the housing boom has gone we are back on the decline curve and have a recession on top. The current downturn is largely clearing out the big businesses that have been hanging on without any growth, for without naming any names, some have been in trouble for a decade or more. This is the new landscape. It is not an accident that everytime the housing market was showing signs of slowing wheezes were introduced to keep it on the boil, extending LTV, reducing deposit criteria, easing income multiples, bringing in BTL when FTBs started to become extinct. If somebody walking down the street can see it then it is not credible to suggest that somebody paid full time to monitor the economy did not see it. Look to the Japanese experience that is the likely outcome. This is a deep structural problem and the brown froth has made the problem all the worse because it has been covering up the problem. The housing boom is basically a ponzi scheme and like all ponzi schemes once started it has to run its course because stopping it voluntarily can only cause collapse so it is kept on until the bitter end, and it will be very bitter for many. In the face of low labour zones continuing to undermine activity here there is only technical edge, smart flexible manufacture, culture and innovation. Not big business as we used to know it. The FX has to be kept low to help what big business there is left as much as possible, so thank goodness we are not in the euro, ie we are to have reduced wealth for sometime. It is not rocket science it is very very simple. I do not know how anybody can say Brown was ever any good. He is dangerous because he believes he is influential economically when clearly he is not.

#16 - there was no boom as such? House prices doubling in four years (1999-2003), the stock market almost doubling in four years (2003-2007), ever-more inventive mortgages made available just so people could edge their way into overpriced properties they couldn't afford... nope, no boom there.

Measured over the longer term our so-called continuous growth looks less impressive. The FTSE-100 hit 6930 on 31 Dec 1999 and has never regained the same height in absolute terms let alone inflation-adjusted terms (measured using gold as a benchmark the FTSE has lost some 75% or more since 1999).

And of course the illusion of growth was perpetuated by a corresponding growth in personal, corporate and government debt. We didn't get any wealthier, we simply bought more things with borrowed money. So thanks to the liability to pay interest most people became poorer over time. So on the basis that people weren't actually getting wealthier, just feeling like they had money, you could argue there was no boom. But I think if we're going to use that argument we have to accept that what we had was even worse.

At least with boom and bust you get the chance to get rich during the boom, with what we just had most people are facing the bust without the chance to get rich first.

probablynogod (#24) 'g' is a FACTOR. Do you understand what a FACTOR is? Are physicists fixated on forces?

One important use of FACTOR ANALYSIS is as a data reduction technique. Reduction of variables in science is important. I suggest you think about that, but suspect you won't, as you appear to think you already know what is important and what is not.

LordGreenShoots (#26) Exactly. The fact is that people tend not to change (their behaviour) - one has to change the people - literally. Sadly, sometimes that has been done violently for this very reason. The Conservative and Liberal-Democrat parties are not viable alternatives to New Labour. As I've repeatedly said elsewhere, a reformed Old Labour might be, but whether there are enough of those people still about (anywhere) and willing to listen and learn from past errors of policy, is moot, as they've generally been vilified/depicted rather effectively as 'Nazis', 'fascists', 'statists' and have a poor understanding of behaviour and the true nature of its diversity.

''The economy ends up 10% smaller at the end of 2009 than it would have been if it had simply grown at its trend rate''

And where is this contraction falling, in the private sector. So in terms of the private sector you can nearly double the impact, to nearly 20 percent. That is what you are seeing going on around you. Public spend having had no cut backs, in fact the employment numbers have been climbing. The whole basis of the current public spend strategy is to mitigate the downturn and jump the gap until things pick up again. But if this is a landslide to a new level there is no gap to jump, it is driving off a cliff. The public accounts are in a very dangerous state and could easily unravel. The response so far appears to be to dip into reserves and talk of extra direct charges to maintain public services. This can only be descibed as misguided. Under the expectation of substantially reduced tax totals surely it is absolutely imperative that steps are take to reduce public expenditure. The whole system needs rebooting. It is highly likely that we are reading in 12 months time that things are not as bouyant as hoped for, that economic growth is not as good as forecast. I can see no way back for Brown or NuLabour, the only prospect is less and less credibility as reality dawns on the public that we are without a paddle and without a canoe. Following the GE what is the betting that the public accounts are determined to be worse than projected. BTW if growth in Brown froth period has been 3 percent per annum and the treasury say there is a permanent 5 percent drop then the underlying economic decline has been 2 percent. Brown has been captain of a sinking ship and apparently not noticed it, that takes a bit of doing.

26 LordGreenShoots

Yes of course - only a million jobless to go and then all will be rosy.

30 jj

''The Conservative and Liberal-Democrat parties are not viable alternatives to New Labour.''

The Conservatives are currently 1/8 to win, so somebody thinks they are viable. Search 'general election odds'.

glanafon

Message 27

`If somebody walking down the street can see it then it is not credible to suggest that somebody paid full time to monitor the economy did not see it.'

Excellent point. I always find the number of active tenancies on small industrial estates a useful signifier of economic performance. Many estates are empty now. I have never seen it this bad.

Message 31

`The whole basis of the current public spend strategy is to mitigate the downturn and jump the gap until things pick up again. But if this is a landslide to a new level there is no gap to jump, it is driving off a cliff.'

Another good point. This is why there are two legs to this recession (slump?). We are in a liquidity bounce at the moment as surviving businesses finally get some funding and begin to mop up any remaining customers left high and dry after competitors went broke. The real recession starts when the government realises its financial condition is quite unsustainable.

if we think it is bad now it is going to get quite horrible before it gets better. That is always assuming it does get better.

There is a very strong relationship between energy and money.
Non financial sector growth relies on growth in energy or increased efficiency (or a mix of the 2). Financial sector growth too should be linked to energy growth as the financial sector is linked to the rest of the economy, something that seems to have been forgotten.
Recently the financial sector thought they could ignore this create more money without increasing the energy supply - i.e. moving away from the energy standard, creating money without the means to back it
So if the growth in energy slows (i.e. supply constraint including political or lack of investment in the recent past), economic growth slows.
GDP growth 1850-1973 (excluding major wars) in industrialised economies was about 1/3 higher than post the oil crisis of 1973 (and the increased cost of energy that resulted).
As the growth in energy supply post 2000 has been small (any one notice the resultant silly energy price rises over the last couple of years?) i.e. we didn't increased capacity (new oil / gas wells, nuclear plants, wind turbines...) to create growth instead it was just "created" by the financial sector and eventually we have found there is nothing real to back this growth up, the emperor new clothes (growth) were created by the financial sector without the cloth (energy) to back the growth up.

glanafon (#33) "The Conservatives are currently 1/8 to win, so somebody thinks they are viable. Search 'general election odds'."

Have you ever given any thought to how many people believe in astrology?

Stephanie, your 2 graphs would have meant more if the x-axes had been calibrated in a way that I could understand.

This Labour government started well enough in the 1990's, when Gordon held the purse strings.

After a few years though, The Blair started financial surf-boarding, a high risk strategy with no "fall-back" safe position.

Now Gordon has well and truly fallen off the surfboard, and we are paying the price for the last 10 years of Labour risky malpractice.

36 jj

This was your statement - ''The Conservative and Liberal-Democrat parties are not viable alternatives to New Labour.''

This was mine - 'The Conservatives are currently 1/8 to win, so somebody thinks they are viable.'

Nothing to do with astrology. Bookmakers reflect opinion and make a profit and are doing well despite the downturn. I am not convinced, like you, that NuBlu is better than NuLab but they look somewhat likely. My main concern is I do not want to see another landslide victory with weak opposition in the House of Commons.

34 stanilic

If we are looking at 3 million plus unemployed mainly due to the private sector and then a shake out in the public sector that suggsets even higher unemployment. Employment pick up lags an upturn by years. If the profile is bathtub with creeping growth the prospects do not look good because any uplift will be knocked back by the forthcoming public sector squeeze. 3 million looks light at present I'm afraid.

"On this view, in the lead-up to this crisis the government did what nearly every post-war British government has done, and simply mistook a boom for a long-term increase in Britain's potential growth. "

Voila you have answered the question already.
The first chart is the reason why they made the mistake that the second chart exposes.
Cleary Brown had his nose in chart 1 with his "no more boom and bust"
Clearly reality was firmly following the path that it has always followed shown in chart 2.

This exposes Brown's incompetance as a chancellor even more starkly.
Please show these charts to him as you hand him a sword to fall on

RE: 36 (and others) JadedJean

As an alternative approach, could you try describing what the UK would look like if what you want actually happened. I haven't read all your posts so maybe you have done this before but if not why not try it.

I don't want to pre-empt your answer so I'll choose an out of date example. A self-identified "socialist" in the 1960s would probably have responded with a description that included nuclear disarmament, nationalising most (or all) major industries, including of course, the banks. They would probably also have included the abolition of private health care and education, even if indirectly through punitive taxation or regulation and ...

Well, you get the idea. Why not describe what you would like to see, or point at a country that demonstrates it.

Newsjock " This Labour government started well enough in the 1990's, when Gordon held the purse strings. "

You mean when he pledged to stick to Conservative spending plans.

It was a combined Brown/Blair spending binge that followed.

With regards to this blog, I agree with other posters that the figures quoted by the Treasury and the IFS charts are irellevant if they don't take into account the vast levels of debt being accumulated in recent years. What we need is a chart that shows GDP growth rates net of debt growth. This will show whether 'true' growth is being achieved.

As long as there are homosapiens roaming this planet there will be boom and bust.

I always giggled when Gordo chanted that "end of boom and bust" line because it shows a remarkable lack of understnading of economics and human pyschology.

You get bubbles in everything from housing to gold to stock markets to art to oil to spices to corn. Anything that does not have an infinite abundance is bound to be the subject of price speculation and fluctuation.

Even without speculators it will happen.

It's been like that since the beginning of time - the only difference now is that technology helps pick up trends faster and the advent of a large middle class with cash to spare and a herd mentality, coupled with a plethora of self-help finance books and the Kirsty and Phils of the world have made that the rises and crashes are that much sharper.

There is no ready solution to this adn the sooner this is realised the easier this recession will be to swallow.

On the subject of businesses failing at the moment - there is unfortunately an unpalatable truth for which I will no doubt be crucified on this board for airing.
The simple truth is a lot of businesses that are now failing would never have been in business in the first place had they not been carried along by the consumer boom of the last ten years.
Yes some have been trajic victims, that much is very sure.
But similarly some should've been out of business ages ago and were only treading water thanks to a limitless supply of cheap credit.

Another reason, surprisingly, why I think mre banks and finacnial institutions should've been left to go to the wall.
The new market place is simply too small for the amount of institutions competing, yet again, for a smaller pool of profit.

glanafon (#38) You didn't understand what I posted.

"The Conservative and Liberal-Democrat parties are not viable alternatives to New Labour."

I have explainend why at length. How the general public votes is not the point, it reflects dysgenesis and egregious propaganda, hence my remark about popularity of astrology (a sign of irrationality).

hants_gw (#41) Yes, pretty much post-war Old Labour without the Trotskyite nonsence which damaged their credibility and with policies shaped by what we now know about human behaviour, especially education. As I see it, the USA did a very 'good' job of making Old Labour appear less viable than it really was, and it's now reaping the whirlwind as a consequence. Old Labour was, when it came down to what mattered, essentially 'National Socialist'/'Socialism in One Counry' as in 1930s Germany, the much maligned Stalinist USSR, and the PRC today. Getting more people to see this without their getting hysterical, is of course, very difficult given decades of Austrian School/Chicago School black propaganda and the de-nazification Collective Guilt Campaign which is still very much with us in support of Liberal-Democratic economic anarchism.

#29 JadedJean: "you appear to think you already know what is important and what is not."

Oh JJ! You couldn't really make it up. If anyone on here has already decided what the answer is (a very unscientific attitude if ever there was one) it has to be you, don't you think? Do you not accept that there may be alternative explanations for the variability in IQ data other than the one you seem to have adopted (quite apart from the questionable status of the data itself)?

Everyone I know who bought a home as a first time buyer in the 5 years up to 2007 did so on mortgages of between 6 and 9 times their annual salary, all these people have no money to spend out in the economy on goods and services because all their income each month goes on paying the mortgage and other bills. The worrying thing about what the government has said right from the start of this crisis is that all they need to do is pump enough taxpayers cash into the banking system so that lending and debt levels can get back to what they were in 2007 and everthing will be alright.
I think we are alone in all the major economies in the way we are laying the foundations of our recovery in the sense that we seem to be trying to reinflate our asset bubble, and any kind of argument will be employed by the politicians to justify this happening.
Look at what the FSA said today, banks have to lend more to companies but at the same time have to insure not to repeat the mistakes of the past.
With so much taxpayers money on the line, we have a right to know what is happening in our name!

44 jj

Well lets just imagine the conservatives have won. You are saying the winning party is not viable. Really what you are saying is the democratic process is not viable. What you are saying is you want to see what you want running the show. Many individuals want that, that is why we have the democratic process, to stop them. I do not favour the undemocratic alternative thank you.

No.46. muggwhump

I agree.

The sad irony is, taxpayer money will simply inflate the bad debts, as our government continues to encourage the banks to lend to unproductive businesses.....

If this were a short term 'normal' recession, where a bit of short term lending would dig businesses out of a hole, allowing those businesses to then repay the loans from future profits, the government's current strategy could work.

However, we are actually facing a long term economic slump, where over-supply and over-capacity mean that new lending will cause the fundamental problem of over-indebtedness and associated bad debts to get worse.....

The marginal productivity of debt is negative - ie more lending causes profits and the economy to shrink rather than expand.

probablynogod (#45) "Do you not accept that there may be alternative explanations for the variability in IQ data other than the one you seem to have adopted (quite apart from the questionable status of the data itself)?"

No I don't at the moment. If there were credible alternatives, I'd have mentioned them. You certainly don't know of any, nor do you appear to know how research is done in science.

Is that a clear enough answer for you? You don't appear to understand what I am posting here for. You do appear to (rather idiotically in my view) want to be a member of the already too large Stephanie Flanders blog 'anarchists' club (no disrespect to Stephanie Flanders), which somewhat helps make my case for me.

muggwhump (#46) Sadly (and it doesn't matter how often this is said, many won't accept it), in the Liberal-Democracies 'consumers' are treated as cash-cows/money pumps, and caveat emptor is used in a sinister way along with the myth of equality.

If people don't want to be ripped-off, so these predators assert, they should get themselves a better education or make better 'choices' etc, as it's a 'free-society' etc etc.

The flaw in that line should be clearer to all, but sadly isn't because a) ability is normally not uniformly distributed, and the facs are 'censored' by a carefully crafted and reinforced political correctness which serves predators very well by rubbishing the facts of the matter...

Any space on your grassy knoll JadedJean?

Steph,

Was the Treasury chart drempt up by that Government Minister who said

'If you stick your head in the freezer whilst standing in a bowl of boiling water, on the whole your overall temperature will be about average' 'Plus 5%, minus 10%, whatever.'

It was probably Cooper as she has no idea what goes on in the outside world

Anyway, can you do the same to whoever it was please?

Thanks

ps And the Government wonder why we don't trust any of their figures, predictions, projections, pronouncements, or any of the words they utter.

pps Nice bit of work by Bob Chote - tell him to take Monday off as reward.

Message 39 glanafon

My nightmare is unemployment incrementing over time to somewhere between 4 or 5 million. It might even take a few years to get there. Under such circumstances we can either forget the minimum wage at its current level or inflate it down to nothing. Either way we have to find a means to get so many people back to work as they can't all be estate agents.

The really scary policy for me is the Crosby report which the government slipped out in the budget with hardly any publicity whatsoever. With the taxpayer funding 20 billion of mortgage backed securities in the next 12 months you can't tell me they are doing that just to make it a little bit easier for people who can already afford a mortgage to buy into a falling market?
Of course not, it is in effect the governmemt pumping enough mortgage product onto the market to ensure property prices start rising again! By doing this the government is trying to control the price of housing in this country so that the banks can always lend to people using their positive equity as loan security safe in the knowledge that house prices will always be guarenteed never again to fall backed by taxpayers money! I don't know what you'd call it but it is neither capitalist nor socialist, honest or fair.

#47 Glanafon - I see no evidence that the "democratic process" has served to stop certain interest groups from running the show.

Perhaps you can recall casting your vote to send your tax money to prop up Pol Pot. Or how about the popular vote to invade Iraq? Who voted for the particular model of globalisation whose primary purpose was to further enrich the already obscenely wealthy, whilst simultaneously lowering the average share of GDP available to wage earners.

Please tell me who voted for all of these things, I obviously missed the vote.

#46 Muggwhump "With so much taxpayers money on the line, we have a right to know what is happening in our name" Too right, just ask glanafon to explain - he will know because the democratic process mandates that he will know.

Nobody knows what the future long-run growth in potential will be. We will, at best, only be able to guess in retrospect. Which makes life interesting for all economic commentators.
What really matters is that Governments try to steer even though they must do so without adequate information. And ensure that worldwide recessions like this one are dealt with quickly. We now know that UK retail sales held up much better than elesewhere and that, consequently, GDP growths have not declines as much as they might have. That speedy action last October is not yet acknowledged.
What Bankers and all others should learn from this crisis is not to trust the results of econometric models because they are inherently unreliable and unable to forecast the unpredictable changes in human sentiments. But they should be used as guides to what's going wrong, or gone wrong.
Eventually pessimism will fade and borrowers and lenders will emerge. That will be sooner if government keeps intervening to sustain demand. Being sooner will enable corporate profits to be made and taxes collected on them. That - and the recovery in bank share values - will help us pay down the debts we've had to take on to avoid us all going bankrupt. This rescue of markets is not a physics equation where inputs can equal outputs. Lots of guesswork by HM Treasury is needed, and lots of difficult and uncertaint decisions taken as the rescue unfolds. Commentators merely criticise and offer few useful insights.

PPP/PFI??

muggwhump (#54) There are private property mortgages and there are commercial property mortgages.

What was the incentive for those private sector borrowers from banks in the mortgaging back of (inner city and elsewhere) Public Sector property, such as schools, hospitals etc?

Joe/Jamal Adams/Ahmad next door make a nice focus/distraction, but was that really what this has ever been about? Even when it comes to domestic dwellings, they're not just bought to live in, they're bought as Buy-To-Let...

We have a Below Replacement Level TFR for the indigenous population too...

VinChainSaw (#51) You, like so many, clearly have much to unlearn... ;-)

53 stanilic

The prospects are quite feudal on the downside. Being unemployed is not working so the minimum wage does not apply. However being unemployed also requires claimants are engaged variously in on the job placements for experience, training which is a loose description, voluntary work. It was postulated a long time ago that in technically advanced society an unemployment rate of 8 percent was to be expected. I cannot give a link, it was pre internet, 70s and 80s when the impact of low labour zones and IT where first being discussed. However you cannot have millions of people claiming benefit and creating a black market so unemployment if anything will become more regulated. If you have all those unemployed workers then how long before they are used to take over public sector work. If there are not the jobs it doesnt really matter how much grooming of the unemployed you do the problem remains. The social and welfare system is not designed to cope with these sort of problems.

If unemployment freewheels upwards then unless employment picks significantly up the whole taxation system runs into problems as tax take is 46 percent (plus PPP and PFI) so services have to contract and means testing has to be expanded. There is effectively already a 5 percent budget contraction needed based on the treasury figure of a one off drop of 5 percent following browns froth, let alone problems due to an increased welfare bill.

Existing long term debt in housing continues, it has notthing to do with property values damping down disposable income. Graduate debt will affect many.

The low wage zone will not disappear further undermining growth. there are a lot of very poor people in the world ready to do the work and the model is proven. Technology sadly tends to be commercialised, which is the important bit - commercialised, most effectively in the US. China will move up the technology ladder providing further pressure. Multinationals, gnerally, keep the IP and knowhow at home reducing the R and D base. Low overheads, the internet, flexible smart processing, culturally driven output is the main opportunity.

I find it hard to argue with your upside unemployment figure. We are having forecasts of job losses of 1.5 million approx 2008 to 2010 basically from the private sector, from a base point of 1.8 million. Nobody is saying anything about public sector job losses, its taboo. But there will be some and there could be quite a lot. You could even have them being made jobless then placed back in the sector on work experience on benefit.

I knew a highly qualified finance director of a major comapny who got kicked out after a coupe. He could not get employment and ended up giving his work away to the voluntary sector and living on benefit and savings. The mechanism is like musical chairs. Get a chair get a job. No chair no job. Music still playing. Or build your own chair is an option.

55 armagediontimes

I agree.

The only solution I can see is improving the feedback loop on the Democratic process via digital democracy. So they can't just go and do what they want once elected. I cannot see any other possible improvement in the system. depends how it goes with BO in the US, he is supposed to be trying to move in that direction. Sorry gotta go.

One of those "macro-prudential indicators" you might have thought to look at could be the Government current account deficit. Since 2001 Brown hasn't balanced a budget and over the seven years to 2008 he borrowed over £180 billion. Since then, he's really got going.

He didn't just fail to fix the roof when the sun was shining, he was up there kicking the tiles off!

Once the pied piper of Sedgfield made it clear that it was ok to fill butts with wrigglies, it became inevitable that the nations financial system was fated to be turned into an enormous AAA's hole backed by the taxipayerrs , they now boast that the orbit of Uranus will never be the same again .

Surely no sensible person can believe the first table, ie the arguement that the economy was not overheating and the crisis was a bolt from the blue. What a cop out for government.

Surely the reality is that the credit crunch was caused by rapid expansion of the secondary, offshore, banking system due to imprudent and unregulated lending. At it's height this created as much credit in the world economy as the primary system and when, inevitably, the bubble burst its impact on the primary banking system was catastrophic.

That huge bubble of credit caused unsustainable increases in asset values, particularly housing but also in company valuations and buy outs and in commodities. Those increases were well known and well documented, not least of all by the Bank of England.

For the government now to argue that there was no boom and attempt to reinvent economic reality is unbelievable. It is patently true, and again not just with hindsight, that the government were not exercising due prudence at that point in the cycle and were not building up reserves.

Working in the manufacturing sector, I can't say I noticed either a boom or steady growth over the past 6 years or so. It's been more one long struggle to keep afloat.

Maybe a better way to look at things is that the supposed wealth created by the financial sector over the past decade was just a fabrication - a mirage. They didn't actually contribute to GDP, they just printed money for themselves, creating a huge asset bubble in the process.

If you plot a similar graph of GDP less the profits (and now losses) of the financial sector, I think you will find there was no boom. and not such a big bust. The problem is the accrued wealth and debt that has built up in the process. What's needed now is a redistribution of wealth (and writing off of debt) to put things back in balance. I suppose heafty dose of inflation would do the trick, though it would be much cleaner and fairer to do it through the taxation system.

We had a credit boom, Simple. There can be no denying it. Governments and Banks debase our money by constantly expanding the money supply in concert. We will always have boom and bust. The credit crunch is just the market trying to amend this excessive monetary expansion. Should we fear deflation - no. Deflation would solve many social issues and make us all a lot better off. As long as we have credit booms we will always have poverty as the government robs its citizens.

People say the financial crisis is the fault of the market, but its government that has caused the bubble economy we see. They have a monopoly on the money supply and will continue to do so. Unless we give it, once more back to the market like it was in Britain 200 years ago.

https://theageofstupidity.blogspot.com/2009/02/fallacies-of-deflation.html

I would harbour a guess that Graph No.1 is the product of the fevered minds of the Politicians at the treasury and Graph No.2 would be the efforts of the impartial Civil Servants at the Treasury.

GROSS DOMESTICPRODUCT

It says it all really. Actually, the film 'The Believer', said a lot too. Some people are inevitably, and quite rightly, worried about what's going to fill the gap :-(

#60 glanafon. Mr. Obama is unlikely to solve any problems. Take a look at the differences in his policies to those of GWB.

Bush wanted to give large amounts of taxpayerts money to Wall Street. Obama wants to give large amounts of taxpayers money to Wall Street. Bush used the conduit of Paulson (ex Goldman Sachs) to deliver the cash to the greedy. Obama is using the conduit of Geithner (ex Goldman Sachs) to deliver the cash to the greedy.

Bush wanted to invade Iraq and Afghanistan. Obama wants to disengage with Iraq and beef up the commitment to Afghanistan and to threaten Pakistan.

Bush supported a bunch of wahabbist lunatics in Saudi Arabia - Obama supports a bunch of wahabbist lunatics in Saudi Arabia.

Maybe the French can help. Dominique de Villepin has today warned of the revolutionary risk in France.

67 jj

The reality of the other person is not in what he reveals to you, but in what he cannot reveal to you. Therefore, if you would understand him, listen not to what he says but rather what he does not say.'' Kahlil Gibran

#53 Stanilic. It can be evidenced that in the UK 9 million people of working age are not working. Whatever else these 9 million people may be they are unemployed.

On what basis can you postulate that it may take a few years to reach an unemployment level of 4 to 5 million?

68 arm n leg times

If better communication does not work then I can see no other route. Do you have any alternatives.

I don't know where the idea has ever come from that the exploitation of the population is something new. It is devil take the hindmost, it always has been. You either let somebody exploit you or you exploit yourself.

The french always are more active. It is one thing to have revolution in the 1780s and quite another thing today. If the key is high unemployment in an EU country then Spain is a potential hot spot. I do not have much expectation in this area, if it ever gets really bad the majority will accept that the minority pay the cost and see force used if necessary. Now where did that happen. Its like a minor operation, the only person who has a minor operation is someone else. Its where you are in the picture for most people. Redundancy followed by lifelong unemployment for somebody who has worked and wants to work is little different than a psycholgical Aztec sacrifice ritual. Both are localised both are dehumanising and both are done for the 'benefit' of the majority. Not as bad as sending kids into a pointless war.

The Pakistan thing is a logical development of a bad strategy. Make it bad in Afghanistan so what happens they just move along a bit, they are just mountains. And in the meantime the war breeds more converts. I can't think of a better motivation for trouble than foreigners going around killing somebodies relatives. This is the same madness as Vietnam. If the US had given the money spent on the war to the locals instead of going to war they would have all been capitalists.

70 arm n leg times

As the projection is 50 percent of the population will be of retirement age in a few decades (2050) you can use any figure you want. I have used the same figures because that is the conventional framework. The issue is the shrinking workforce that creates the wealth cannot supply the tax revenue that the majority want for the services they wish to see, and are stridently demanding. The majority being outside the private sector - either in the public sector consuming the 46 pence in the pound total taxation or the economically unproductive group wishing to consume services. Why do you think most countries will welcome somebody who can be self employed or bring a business with them to provide employment. You dont really need to know the categories all you have to do is look at the numbers due to be out of work, and the tax take which has now to fall based on th size of the economy. Everything is pushing in the wrong direction. And young professionals are leaving.

#71 glanafon. Communication may work - but not at the level you appear to think. It has to be more grassroots and the people need to realise the power they have.

Take big supermarkets, a lot of people don´t like them. The answer is simple - just don´t buy anything from them, and they will be gone inside a month. Obviously the people that do not like supermarkets are in a minority. I believe there is a compelling argument against them - if that argument can be successfully made they will go. If it cannot be made they will stay - that is the power of communication and democracy. The dice is loaded - supermarkets spend millions in advertising, those who argue against them basically spend nothing. The internet can potentially offset this monetary advantage. Time will tell.

I´m not sure that exploitation is the natural human default. I try not to exploit people - although I have in the course of my working life. But I did that because I was paid to do it. A bit like a soldier who kills people in war - doesn´t mean he will kill someone he meets in the street. It is complex, I don´t know, maybe you are right, but I hope not.

Not much chance of a revolution in Spain. The memory of a previous regime is still close to the surface. The Spanish play both ends against the middle. See them on the international stage and they pay homage to the Anglo-American model, see them at home and they look after each other. Unemployment in Spain is not necessarily like unemployment in the UK - there are plenty of things in Spain that are free - good weather, beaches, the family. This all affords flexibility that is not so easy to find in the UK. There are not that many big companies in Spain (Telefonica, Repsol, Santander, Iberdrola, BBVA - and then you struggle). This has an effect.

There is an old card school saying: "There is always a fool in every game, if you don´t know who it is then it is probably you." Take a look at what is going on in Afghanistan/Pakistan and tell me who is the fool in that game.

I have been to a lot of places in this world - and pretty close to the bottom of my list not to return to is Pakistan. If the US/UK get sucked in then there is little hope. All my predictions will come true. If we have any self determination now is the time to disengage from Pakistan. Maybe it is written, I know it is not logical, but then what we are doing now is not logical either.

#58 and 67 JadedJean:.

'The Perfect Storm' - looks like something that Brown and (especially) Blair would agree with entirely, and have done something about. Have you looked at a primary school in this country lately?

I am shocked to see no mention of dysgenics in the ETS film. Wonder why not.

Standing by for the next amusing salvo of personal invective, based on inadequate information and incorrect assumptions about my real (not pseudo) scientific credentials.

#73 armagediontimes:

I can sympathise with what you are saying in the seccond part of your comment, but I think you ignore the fact that Pakistan has the Bomb. Don't you think that might affect our attitude?

glanafon (#69) One for your quote repertoire? ;-)....

"I comment on verbal behaviour posted by you and others, the person per se does not come into it except as source of that behaviour, hence the remarks about the invalidity of the ad hominem(in all its forms)."

JadedJean

probablynogod (#74)

"'The Perfect Storm' - looks like something that Brown and (especially) Blair would agree with entirely, and have done something about. Have you looked at a primary school in this country lately?"

Yes.

"I am shocked to see no mention of dysgenics in the ETS film. Wonder why not."

I'll tell you. Those who know this field (and who prompted ETS), know that this is chapter 15 of 'The Bell Curve' by Herrnstein and Murray (1994), which has a long history which goes back to the beginning of The London School early last century.

"Standing by for the next amusing salvo of personal invective, based on inadequate information and incorrect assumptions about my real (not pseudo) scientific credentials."

My assessment is both sound and just based on your impudent postings to date. You need to grasp that, and you need to show more respect for what you do not understand.

What strikes me about the graphs is this:

1. In Chart 2, the area between the "long term trend" and "actual growth" lines from 1997 and 2005 represents the extra wealth put into the economy. This wealth was added by the "false boom".

2. Similarly, the area below the "long term trend" line for the years of recession represents the amount chalked off our long term wealth.

It seems very clear that this theory of how it will go will mean that we will keep most of the gains of the "false boom" and continue serenely in short order. Although it purports to attack the government, it is actually on all fours with their complacent predictions.

Besides, if this is just a correction for a false boom, would not those countries who didn't have their economies inflated by debt (ie: countries with no boom or a true boom) be immune from the disasters.

What I want to know is why is Britain statistically doing well in comparison to others? Given that our economy was one of the most debt dependent, it is hard to see why we should be paying our way so well? I know the world is not fair, but this seems bizarre.

76 jadejean

No, post 69 is pertinent, your postings are very revealing, particularly what you do not say and what you do not respond to when placed alongside what you do say and do respond to. There are issues you do not wish to comment on despite the fact that you cannot normally wait to have a go, to treat people as patsy by repetitively posting comments from an identifable cascade menu. Now why could that be. But you appear to think you are intelligent, you work it out. ; )

glanafon (#79) "There are issues you do not wish to comment on despite the fact that you cannot normally wait to have a go, to treat people as patsy by repetitively posting comments from an identifable cascade menu."

I'm educating you (or others, it doesn't matter which). You should be grateful. At present your behaviour indicates that you are not. This indicates that you are counter-productively making matters harder for yourself. That's not very smart or helpful to others - maybe you can't help yourself ;-).

Keep it up Steph, even if, like me, some people may find all the graphs and figures hard to follow, one thing is certain; every dog has its day, and western man's day is ending. Perhaps a study of the fall of the landed gentry in this country will give a good representation of what is happening to the UK now. Just how long we can walk around wearing clothes, listening to electical appliances, using tools and a whole lot of other things made in some factory abroad, all bought with foreign money on tick, I just don't know. But when it does end the fun will certainly start.

73 arm n leg times

I did not wish to see the Iraq activity and I thought Afghanistan was a basket case. Paddy Ashdown is reported as advised that he thought it would be surgical, a quick in and out. I preferred to look at Ghengis Khan - he had a cup of tea and asked to go through, Alexander the Great - he had the equivalent of a quick arm wrestle and off - left them to it, and the USSR - long term problems. History says 2 reknown successful military leaders both judged it better not to engage, whilst a 3rd military power chose to go head on and lost. That is without the British Great Game experience in the area in the nineteenth century. If I did not think we should be in Afghanistan it leads me to thinking we should not be in Pakistan. Being seen as a Little America has done enormous damage, but Blair is still adulated by some.

Call it what it is - credit is debt, work is exploitation. There is nothing wrong with either as long as you know what you are dealing with and set boundaries.

The corporate use of financally advantage to acheive their dominance is a problem. The only thing that even starts to redress the balance is communication. If democracy leads to elected parties ignoring manifestos and doing what they want once in place in what way does having a non democractic system solve this. In a non democratic system getting rid of the incumbent is difficult. The issue is trying to make democracy more not less accountable. Why should it be easy. Didnt I see somewhere that people spend more time on the internet than watching tv. Doesnt that point to opportunity. The fact there is such establishment alarm at an unfettered internet is telling.

Things to do so I am off.

78 forestz

It is easier to write off debt than cope with a collapsing manufacturing base in a short period. Manufacture requires longterm investment and skill. Look at the ratio between say a product line - say 5 million capital plant for a 80 quid product. The customer gets a great deal, if you only sell one you take a near 5 million hit. If the customer is in trouble his loss is limited to the 80 quid he borrowed to buy the item. The short term senario does not tell the whole story because long term manufacturing is needed. The structural problems still remain. Why do you think there is such alarm about car makers folding and why is it so difficult to justify bailing them out, it is because the sums are massive and long term you need work for people. So countries that are involved in manufacture and export have real problems short term. That doesnt make us better placed, it just means there are more in the same boat and it is still slowly sinking. Apologies but I have to go.

#72 glanafon - Have you been captured by Jadedjean? This argument is rubbish.

I point out that today we have 9 million people of working age who are not working, and you start worrying about the future effects of a shrinking workforce relative to total population.

If you cannot use, or do not want, the resources available to you today then how can there be a problem if those resources diminish over time?

#80 Jadedjean - You are not educating anyone. You keep repeating the same message. You never explain in clear terms the benefits and dis-benefits of your position, and you never address perfectly reasonable questions as to the implications of your message.

Rather you respond to any criticism with, as post #74 points out, a "salvo of personal invective, based on inadequate information and incorrect assumptions..."

You do not educate people by attempting to bully, harangue and bludgeon people into submission. The great irony is of course your professed concern with declining educational standards.

Unlike you I try to recognise that I could be wrong. If a great number of people write in to say that they think you are a great educator, then I will of course review my position. Somehow I think I´m on solid ground

armagediontimes (#85) "You are not educating anyone.

Speak for yourself. It's safer/more accurate ;-).

"You keep repeating the same message."

But you're not grasping it. Practice makes perfect. Most learning is a matter of repetition.

"You never explain in clear terms the benefits and dis-benefits of your position,"

False. You also need to learn new terms.

"and you never address perfectly reasonable questions as to the implications of your message."

I know how to recognise reasonable behavior. When I see it, I respond to it accordingly. Similarly, when I see unreasonable behaviour I respond to it appropriately.

"Rather you respond to any criticism with, as post #74 points out, a "salvo of personal invective, based on inadequate information and incorrect assumptions..."

It's called correction.

"You do not educate people by attempting to bully, harangue and bludgeon people into submission."

Some people are not educable. Some are narcissists, others SEN, Oppositionally Defiant (when children), soem just not very bright etc).

"The great irony is of course your professed concern with declining educational standards."

Standards are declining because the mean cognitive ability of the people is declining. One can't make silk purses out of sows' ears. Standards trail this dysgenesis. It isn't the fault of the educators, it's politicans' policies which bring this about.

"Unlike you I try to recognise that I could be wrong."

You are not doing that very well.

"If a great number of people write in to say that they think you are a great educator, then I will of course review my position. Somehow I think I'm on solid ground."

I strongly suggest otherwise. Firstly, how would you ever know? Secondly, and relatedly, you can't base the truth/falsehood or validity of my (or anyone else's) posts on what most people think.

You really do need to look into why that is so, so do many people these days.

Ms. Flanders

Thank you, and the IFS, for showing us this element in how we got into quite such a fiscal mess.

Gordon Brown's choice (it would have been his personal choice, at the remote upper end of the range that the Treasury officials thought plausible) of assuming 3.5% per year growth potential looked like wishful thinking at the time. I was relieved when he later lowered the estimate. However, I simply failed to spot how completely it distorted his across-the-cycle Budget rules and arithmetic. He could only indulge in opening the spending taps, while appearing to stay within his rules of prudence, because of that past over-estimation of growth potential.

My guess is that he fooled himself; and refused to listen to anyone who warned him.

I think the current crisis is not a result of typical boom and bust cycle. It is a result of the collapse of the financial pyramid like in Albania in 1996 - 1997. Therefore Ms Flanders' analysis seems somewhat vacuous to me.

You can read more about the current budget at "A horror budget" and follow further analysis on "Financial crisis? It's a pyramid, stupid." blog.

84 armagediontimes

''I point out that today we have 9 million people of working age who are not working, and you start worrying about the future effects of a shrinking workforce relative to total population.

If you cannot use, or do not want, the resources available to you today then how can there be a problem if those resources diminish over time?''

You will never employ all the resources available. The 9 million you quote presumably includes incapacity claimants who are determined by searching statute and structured medical examination as being unable to work. It is easier to use the measurement of JSA claimants. it does not matter if the figures are cooked, they are still an indicator. The key issue is the growth in imbalances.

The issue is the reduction of available work in the economy. This is mainly driven by low labour zones taking work away. There is also a technology impact.

Many of retirement age want to work but cannot get work because of their age. In terms of the JSA figures in what way is this any different than the redundant person who elects not to claim JSA because their redundancy pay off and or savings are too large to allow a cash benefit claim and therefore is not in the JSA figures. That is why I said you can pick any figure you want. You can. That does not mean the JSA figure is not useful. Your 9 million figure is weaker than the JSA figure. The JSA figure is people who are out of work, want work, and have no other money.


There are several factors at play -

Technology producing goods more efficently and with a long functional life.

Low cost labour zones taking work away.

An aging population.

High expectations in service provision.

Higher costs in health intervention.

There are others but those will do. They have been a cause for concern for decades.

If you have the bulk of the population not involved in wealth creation but demanding public services via the democratic system but paid for by the minority you have a time bomb. People will leave and take work and their tax payments with them. Its happening.

jadejean various

This ETS you keep going on about as providing guidance.

Their number one bullet point is -

'Listening to educators, parents and critics'

Please note the 'critics'. You are never too old to learn. ; )

jadejean



There is a dangerous tendency to assume that when people use the same words, they perceive a situation in the same way. This is rarely the case. Once one gets beyond a dictionary definitiona meaning that is often of little practical valuethe meaning we assign to a word is a belief, not an absolute fact.

In ancient Greece, Socrates argued that education was about drawing out what was already within the student. (As many of you know, the word education comes from the Latin e-ducere meaning "to lead out.") At the same time, the Sophists, a group of itinerant teachers, promised to give students the necessary knowledge and skills to gain positions with the city-state.

There is a dangerous tendency to assume that when people use the same words, they perceive a situation in the same way. This is rarely the case. Once one gets beyond a dictionary definitiona meaning that is often of little practical valuethe meaning we assign to a word is a belief, not an absolute fact. Here are a couple of examples.
The central task of education is to implant a will and facility for learning; it should produce not learned but learning people. The truly human society is a learning society, where grandparents, parents, and children are students together. ~Eric Hoffer

No one has yet realized the wealth of sympathy, the kindness and generosity hidden in the soul of a child. The effort of every true education should be to unlock that treasure. ~Emma Goldman

The only purpose of education is to teach a student how to live his life-by developing his mind and equipping him to deal with reality. The training he needs is theoretical, i.e., conceptual. He has to be taught to think, to understand, to integrate, to prove. He has to be taught the essentials of the knowledge discovered in the past-and he has to be equipped to acquire further knowledge by his own effort. ~Ayn Rand

The aim of education should be to teach us rather how to think, than what to thinkrather to improve our minds, so as to enable us to think for ourselves, than to load the memory with the thoughts of other men. ~Bill Beattie

The one real object of education is to leave a man in the condition of continually asking questions. ~Bishop Creighton

The central job of schools is to maximize the capacity of each student. ~Carol Ann Tomlinson
These quotations demonstrate the diversity of beliefs about the purpose of education. How would you complete the statement, "The purpose of education is..."? If you ask five of your fellow teachers to complete that sentence, it is likely that you'll have five different statements. Some will place the focus on knowledge, some on the teacher, and others on the student. Yet people's beliefs in the purpose of education lie at the heart of their teaching behaviors.

I 'd love to read your reactions :)

glanafon (#90) "'Listening to educators, parents and critics'"

This, sadly, is advice ETS which needs to take :-(. They did not orignate this research they just reported/supplemented it.....in the original feb 2007 video they acknowledged this.

ETS promised a White Paper when they went public in Feb 2007. That has not appeared to the best of my knowledge.

Can you work out, from that I have posted, why that may be so?

You presume far too much, and you are learning far too slowly. The two often go hand in hand....

glowingHorizon (#91) "There is a dangerous tendency to assume that when people use the same words, they perceive a situation in the same way. This is rarely the case."

Hence the frequent Quine references and criticism of intension/Natural Language.

"In ancient Greece, Socrates argued that education was about drawing out what was already within the student. (As many of you know, the word education comes from the Latin e-ducere meaning "to lead out.") At the same time, the Sophists, a group of itinerant teachers, promised to give students the necessary knowledge and skills to gain positions with the city-state."

Excellent! The latter are the progenitors of the Neoconservative New Labour/Conservative/Liberal-Democrat anarchists.

Most of the quotes you cite are, in my view, at root anarchistic/sophist/neo-liberal pro free-market ideology. Teaching in the Liberal-Democracies is very badly taught. Few teachers understand how behavioural plasticity works, less so today than they did a generation or two ago for what should be obvious reasons, but are not to many :-(.

Operants are driven by genetic expression, and shaped by their consequences. Reinforcement just describes changes in rates of emitted behaviours.

Quine and Skinner were Tweedledum and Tweedledee - third audio. If you can dig out Skinner's audio 'On Having a Poem' it's priceless (sadly removed from the web recently, but the text is in Cumulative Record).

I hope that answers your question ;-)

Stephanie,
The narrative arc being pushed by GB and the chairman of the treasury select committee (John McFail) is that the recession is a direct result of bankers failing to manage risk and general incompetence in the financial sector and that the government fiscal and monetary policies pursued by GB were sound and not a contributing factor. Whilst, I accept that the banking sector and its regulators in both the US and UK had a major part to play in this disaster I find the attempts to spin the failure of GBs monetary and fiscal policies and the attempts to rewrite history by GB and the treasury as objectionable.
I find it hard to accept that GB was not aware that his fiscal and monetary policies were the cause an unsustainable boom that would result in the inevitable bust whilst CPI inflation was low RPI having been discarded - the money supply ( M3)and consequently debt were expanding at 10 to 15% a year over the period.
The fact that you have highlighted the IFS analysis that exposes the lie hopefully neuters some of GBs and tresury spin. However, it could be argued that GB was still unaware of the consequences of his policies and that he really was deluded enough to believe that he had found the silver bullet that had eliminated boom and bust. However this extract below sheds some light on what some members of the MPC were concerned about in 2005

.Extract of Speech by Kate Barker member of BOE Monetary Policy Committee Monetary framework and current issues Washington DC On Monday 21 March 2005
.
The asset price issue
While questions about trade-offs and communication are important, a criticism that would be
more significant if justified is that central banks do not pay enough attention to asset prices.
In the four years since I joined the UKs MPC, we have been criticized for allowing the
exchange rate to remain too strong, and more recently for permitting a bubble to develop in
the housing market (several commentators remain concerned that there is a risk of a
widespread downturn when this possible bubble bursts). In general, I consider there are good
reasons for not acting to offset movements in asset prices per se. The first is the considerable
uncertainty about whether or not a bubble exists and if it does, how serious it is.
For example, while UK house prices are certainly at historically high levels at present,
relative to incomes, there are factors which support an increased equilibrium price: lower
interest rates lowering the initial cost of a mortgage; low long-term real interest rates (which
have increased the asset value of housing); an inadequate supply of new build; increased use
of housing as a savings vehicle for pensions. There are some signs which might indicate a
housing bubble increased private buying of housing for letting with the expectation of
capital gain, and parents using equity from their own homes to assist children with deposits
but it is not clear how far these may have contributed to higher prices. So it would also not be
clear what scale of adjustment in house prices monetary policy should seek to achieve.

7
More importantly, a shift to targeting asset prices might result in significant changes of
interest rates away from the level which would be appropriate to achieve the inflation target.
This is likely to create uncertainty about what the aims of monetary policy are, and lead to
volatile inflation expectations. In particular, there is a risk that the central bank would end up
chasing one asset price after another, with real costs in terms of uncertain strategy similar
indeed to the problems experienced in the UK in the 1970s and 1980s.

Concluding that asset prices should not be targeted does not of course mean that their impact
on the economy and the related risk of volatility can be ignored. As suggested by fellow
MPC member Charlie Bean, concerns about major economic volatility which could result
from a bubble deflating is a factor which should be taken into account in discussing risks
around a central forecast, and therefore could have some effect on current decisions4. In
practice this means giving a bit more weight to possible major deviations from the inflation
target which might be beyond the usual policy horizon of around two years ahead.

The worry about house prices reflects a view that the low level of inflation over the past few
years is partly due to external factors (the strong exchange rate and very weak world goods
price inflation). The consequent low nominal interest rates may have encouraged consumers
to increase debt burdens to unsustainable levels, due to unrealistic income expectations. In
the UK the household savings rate has declined from around 9-11% in the early 1990s to
around 6% in 1998, below the 8% average since 1963. But since 2000 it has remained
broadly stable, and consumer spending has moved generally in line with income growth. It
seems equally likely that most of the rise in debt has resulted from more stable economic
conditions in the UK, with strong competition among loan providers enabling more effective
consumption smoothing for those with sound long-term income prospects. Alongside this
there are a number of low income households whose debt levels pose real problems.

So if the MPC were expressing concerns about the asset bubble in 2005 but were unsure how to respond are we then to believe that neither the tresury or GB were aware of the problem of the asset bubble - or did they just hope that it would go away.

JadedJean# 93

Thanks for your answer

Teaching in the Liberal-Democracies is very badly taught.

I have to unfortunately concur with your statement, however it is not only in so called Liberal-Democraties( Elected Particracies).

The Socrates approach of: Stimulus- Probabilities of responses-Responses should idealize toward a higher consciousness, however the computing model (Input-Output) prone by the Sophists is far more constrictive. And supported to structure any societiesbehaviours. (Believes, social code, superstitions etc) since the dawn of human kind.

#86 Jadedjean. I will know whether or not people write in to say that they think you are a great educator by reading published entries. Providing you know how to read it is not so difficult, and I would have thought a fairly non-controversial test.

Of course I can base the validity of your claim to be an educator on what most people think. If they have learned something from you then you have succeeded, if they have not then you have failed. (Even if they are too narcissistic or too stupid to learn from you, you have still failed since you are aiming your message at the wrong target audience).It is the only test.

Here is your chance to educate me. You keep bemoaning the lack of intelligence in the population, and claim that all kinds of problems exist as a consequence of declining IQ levels. So tell me, Jeff Skilling of Enron has a very high IQ, and took care to surround himself with other high IQ individuals, so how did Enron benefit you, me or society in general?

#89 glanafon - If it does not matter whether the figures are cooked, then why is so much effort, and (dare I say it) intelligence devoted to cooking the figures?

glowingHorizon (#95) It is fundamentally (i.e radically) important to note that the EAB (Behaviour Analytic/Operant) approach is R-S* not S-R (cf. the first two audios).

This entire approach is descriptive of what happens and is as politically incorrect as psychometrics - and that's no coincidence in my view.

# 98 JadedJean
It is fundamentally (i.e radically) important to note that the EAB (Behaviour Analytic/Operant) approach is R-S* not S-R (cf. the first two audios).

yes,It does make sense that the EAB is R-S looking from the biological paradigm, because it is already encoded. However looking from the Quantum physic it does not not make sense. How can can explain it?

97 arm n leg times

In order to see the current problem all that is important is the growth in the numbers of people within the JSA framework. In order to see the long term problem all you have to do is look at the likely trends and imbalances. I agree there are considerably more people wanting work but who are not on the JSA figures, then there are those in a twilight zone where they are working but cannot live on the income so they recieve effectively a benefit, eg tax credit, 16 hours per week at the min wage qualifies for tax credit and JSA claimants are pushed that way if possible. The more you expand away from the JSA figures the less certainity there is. You can soon see why Brown, and Thatcher, come to that, did what they did but it didnt work and they believed their own story. The underlying structual problems just keep growing. It is jumping in a descending lift. Meanwhile here we have growth and more work than we can handle. What we do was structured for this environment after the 1990s gig. As I have said before, it is not an issue to me if I am right or wrong on general issues. I just comment based on my experience and what I believe I have seen.