Going to the country

"But with the government needing to borrow more than 12% of GDP from the markets this year and next, the road to the next general election could be even bumpier than we thought."
Quite so.
But not as bumpy as the road after the next general election .....

Not surprising since the more Britain quantitatively ease the economy, the more it has to borrow from the international markets just to get the same amount in real terms !! Without any real effort to rein in spendings, Britain will soon be in such a deep hole, it wouldn't see the sky !! I think this is what S&P are pointing out, i.e. get your acts together, guys !!

Besides which, with the great loss of confidence in the ratings agencies in general over the sub-prime nonsense, they have to make some guarded comment to cover all eventualities. This is not a predictive announcement !! This is a CYA exercise; and they are covering it with both hands !!

After the inevitable defeat at the general election the 100 to 150 Labour MP's will need to focus on purging the party of New Labour adoption of Thatchernomics and develop sound radical policies on directly managing the economy including a significant sector of publicly owned enterprises (incl some banks)and maybe after the next but one election....?

AAA-rating humbug; this statement is just a bit of preparatory work by the global financial establishment to warn us (the taxpayer) that we will be expected to take the pain for the bankers' gain

tighten your belts people; pain and penance will be good for you; and of course our useless govt from 2010-20??, whether Labour or Tory (let us all pray for a hung parliament by the way) will use this sort of nudge to jump in there and say 'sorry folks but we're going to be £$%"ing you for your own good so vote for us

Japan's debt is pushing 200% of GDP; many EU countries are above 100%; it might not be ideal but does it actually matter that much? I doubt it; we're being sold a line here

time for the voter to wise up; switch off that reality TV programme and try to think!

Somehow it seens it is almost a certainty that more not less will be needed inview of the fact every forecast so far has been out, and very quickly. Not just in this country.

Whether a rating drops and debt costs more, or public services are cut, or tax goes up, or all three, it makes little difference, the only way forward is higher costs. This cannot help the much touted recovery can it. Ah, for the days when all you had to worry about was your moat or duck island or where you mainly lived.

No.4. somali_pirate wrote:
"Japan's debt is pushing 200% of GDP; many EU countries are above 100%; it might not be ideal but does it actually matter that much? I doubt it"

It doesn't matter, in the same way that borrowing 125% of the value of your house didn't seem to matter back in 2007.....

Lenders always fall over themselves to lend more than the value of the underlying asset/productive output, don't they?

There is no need to worry...........

Ladies and gentleman.

China and Asean countries are rapidly joining into some kind of new Commonwealth, free trade agreements abound and China is carefully making it's currency exchangeable and available withing Asean. We are looking at Asean move away from USD.

I sense something new in the air that until now was largely confined to the 'one possible outcome' bin : currency turmoil.

While deflation will continue I suspect some places will vaporise in a flash of hyperinflation (from currency confidence failure of course). The USD will either slide slowly over some years, or hit a catastrophic point and drop suddenly.

I am not a gold bug, but I expect that in this kind of turmoil the price of gold will rise dramatically.

Global Markets, the IMF and Rating Agencies like certaintly or clear forecasts of predicted events in an Economy

At the moment, we have politicians resigning or being fired daily, the Government in a total flunk, a General Election being called by the People and our balances of payments going down the plug hole ( as we cannot afford bath plugs like our PMs)

The direction of sterling will be the big indicator. It rose by a huge amount yesterday and dropped back today but has been on the rise now for a month. Chinese and Japanese buying as they are dumping "dollars"?

Has anyone thought this through without trying to spin. It doesn't really matter what S&P say, or what GB and Darling say, or the economic figures show. What matters is pay cuts, 4 day weeks, house prices falling, unemployment rising, petrol and food still expensive and our own debt levels beyond comprehension.
We can only grow when the banks lend. Anyone seen any concrete signs this is happening (at realistic rates)?
We are still at the beginning of this. Stephanie, you are the reporter. Stop hiding behind volattile economic figures and see the real world.

Every country should hold elections and ask their candidates what they knew about the banking and investment issues, did they vote on any legislation that contributed to the problems and when were they made aware that the crisis was looming? Usually would want opinions on more topics but in this case if the elected officials are not held accountable it will just happen again. Would also like to see a law againist financial institutions having any contact with elected officials or staffs and can only appear to state positions in public forums. The corruption needs to end.

No.7. FrankSz wrote:
"I am not a gold bug, but I expect that in this kind of turmoil the price of gold will rise dramatically."

But then fall dramatically when you decide you want to sell it.

When it comes to currencies, if one currency falls another must rise.
The dollar is falling, with both the pound and euro gaining against the dollar. Overall, in the long run, the euro may turn out to be stronger than the dollar....

The pound is gaining a little on the euro at present, but it still has a long way to go before it gets back to its previous natural level of 1.47

Against the dollar, it could be argued the pound's natural level is approximately 1.65 and we are not miles away from that now, which shows how the markets view the USA's fiscal prospects.....

Given the supposed weakness of the UK public finances, it's quite surprising that the pound has risen about 30% against the dollar in four months.

But then again, the public deficits - while important - are a bit of a distraction from the real impact on our economy and the pound, which is: what does the long-term productivity of the UK economy look like? After all, it's out of productive economic output that we will repay this debt. So are we on the right path to pay off the debt? My answer here:

https://www.knowingandmaking.com/2009/05/private-productivity-and-public-debt.html

I'm trying to understand what the future might hold for us all in terms of interest rates, consumer and retail prices, inflation, deflation or stagflation and the potential of UK business to create wealth; and lets not forget tax revenue.

Although the UK credit rating has not (yet) been downgraded the effect of the negative outlook must be to reduce the enthusiam of potential investors. If this is to an extent that creates a shortfall in the (or any) government's recovery plan, printing money would seem to be the obvious solution.

Will this affect the pound in our pockets, probably. Some inflation, as we are seeing at the moment, is likely. The RPI measure has hidden the 'true' rate of inflation as it has been buffered by the reduction of interest rates. This will not continue as further falls in rates, if any, will probably not be reflected in the actual repayments on mortgages made by the UK population.

So we will see some real inflation. Net revenue to the exchequer will fall with rising unemployment causing loss of PAYE receipts and increased payment of benefits, putting more pressure on disposable income in the form of increased taxation. I can't really see that deflation, which I understand to be a fall in the RPI or CPI indicies, as a strong possibility.

I can however see a rise in interest rates as credit is still relatively tight.

So my view for what it is worth is that we will see inflation and interest rates increase. That might be a good thing if it is not too severe. Government debt will increase. UK manufacturing will be decimated by the loss of skills and finance but global companies in some areas, and I wish I knew what they will be, might do very well. As always the markets will be difficult to predict.

What does anybody else think ?

One good thing about calling an election is that it would force the Tories to state exactly what their economic policy would be. No longer could it just be "do down Gordon Brown, but don't frighten the voters with what we intend". Osborne quickly picks up on the IMF concerns re Britains long term debt and its reduction, but seems strangely silent about the praise it gives to Darling/Browns' measures to tackle the credit crunch in the first place. Its time the Tories came clean, and not just in the House!

9 eatin

There is no problem borrowing if you have the reliability rating, which is additional to the credit rating. The reliability rating basically is an ongoing assessment of the soundness of your projections and if your forecast events occur. It would appear to be increasingly important. The problem, as the banks are finding, is there is apparently a steady erosion of such ratings on the customer database which leads to higher borrowing costs. The BoE base rate is increasingly irrelevent which tells you that the BoE is increasingly detatched from the market and attempting to force policy when the market says no. As such it will make little difference to borrowing costs if the base rate rises. We appear to still be in a slide and that leads to risk aversion. When we hit the bottom things might improve. Tell me - if you hold capital would you lend it at low rates unless you were sure you would, as well as the interest, actually get your capital back, forget the interest bit, capital. The likely outcome if HMG push for more lending is that those with good ratings will be approached to take more and more loans, not those with poorer ratings, so imbalances will just be exacerbated. As those with good ratings are presumably doing okay they are not in need of borrowings so nothing is achieved. It is simply a matter of waiting and impatience is what got us here I am afraid. People wanting funds sooner than they could 'afford' them. If you do not like the situation I can agree with you but it is the bumpy road at the bottom that worries me not the slide which has already been instigated and cannot be stopped. If the bumpy ride at the bottom is too bumpy all that will happen is risk aversion will continue and uplift will not occur. 2010 is the issue not 2009. Politically we seem to have a Canute mentality about and it is just a waste of time, in fact it is probably damaging because repeatedly initatives which almost certainly cannot work are floated only to sink along with credibility. This is the problem with a spin based politic. The spin heros such as Ld Mandelson and Campbell are finding the spin makes no difference in the face of real problems. Next stop the inevitable contraction of public services and increasing discontent amongst the electorate. This will echo for a generation.

Stephanie,

The IMF, Bank of England and Standard & Poor are all making reference to UK bank capital adequacy/bail-out adequacy - manufacturing investment is getting to dangerously low levels where UK capacity could be permanently damaged.Robert Peston says gilts auctions are going well. Could that be because QE is providing the liquidity platform. The IMF says that more private assets should be purtchased instead of favouring public debt.

Look forward to your posts on these vital issues going forward.

So to sum up, when the toxic debt is in the hands of Global banks and insurance companies it is AAA rated.

When that same debt is in the hands of the government (i.e you and I the taxpayer) it is more at risk so likely to lose the AAA rating and therefore potentially cost more to finance (your caveats all noted).

There is a case to say a plague on your house, S&P (and other rating agencies) Are they going to pay up on the current lawsuits where they clearly overrated bank debt and instruments and were paid handsomely for doing so. Why should anyone take into account anything they say anymore?

Stephanie perhaps you could make some assumptions about the rate we need to sort out the finances mid-term and suggest some options, as the politicians clearly will not (even Vince Cable has hinted only at major sections of government activity needing cutting) It would give us a sense of scale. Are we talking reducing unemployment benefit across the board, reducing police, nurses, teachers, army, mandarins by a large percentage compared with the odd aircraft carrier and a few Typhoons. Billions to finance and repay suggests something more radical than the above, just what is it likely to be?

Gordont10 said it is time the Tories come clean What S&P really says is that it is time someone came clean - the current trajectory is unsustainable. Gordon Brown is desperately holding off on unpopular but necessary financial tightening measures so that if the Tories win the next election he can paint them as creating chaos through cuts in public services - cuts he would also have to make if in government. Cynical - and proof even he doesn't expect to win - Labour is already focusing on the next election but one.

12 inoncom

I wouldnt bet on a hung parliament however interesting it might be as an idea. It would anyway appear to be likely it is irrelevant who is in as policy will be increasinglty fixed by events. As the UK has already largely lost its manufacturing base it cannot lose it twice, whereas other developed countries heavy on exports still have some to potentially, probably, lose. However viewing this as an advantage is somewhat like comparing the severity of war wounds. There remains little reason the believe a heavily shackled finacial sector will boom, further one has to be concerned strategically that the financial sector can be piped away to other locations. The financial sector grew rapidly and can disappear just as rapidly, it would appear to be potentially nomadic. It is just the sort of sector an aspiring China would be interested in aquiring. China appears to be moving towards buying european businesses to gain access and overcome cultural communication problems but the next step is stengthening what goes on in China. Multinational activities are based in the homeland, the HQ, that is where the decisions are made, however multinational they might appear. Flutters in currencies are not that important surely.

Predictable news, but none the less shocking.

At one time the bond market was there to serve companies and governments when governments and companies deemed it necessary. That was not the case for the last decade however.

For a long time now there has been a wall of money (some of it real, most of it phoney) that needed something to securitise. Corporate earnings, mortgage payments, government interest coupons...you name it.

Money lenders thronged to the western world with ship-loads of cash. The lenders appetite was so voracious that nearly ANYTHING was deemed to be securitisable. Even rubbishy businesses, barely solvent mortgagees and financially incontinent governments.

Now the money lenders are getting realistic about their loan recovery plans and they are making a start by cutting back the number of new loans issued.

As sure as night follows day, lenders will soon be requesting a higher coupon from their borrowers.

It will be a long time until bond markets are our servants again, there to help us out when the need arises. For the next few years bond markets will be our masters and we will be their bonded labourers.

#13 DustinThyme You can see simultaneous deflation and inflation. A deflation of asset prices - say commercial and residential property, and an inflation of commodities - say food and energy.

Such a scenario tends to wipe out pretty much everyone.

You would expect interest rates to rise - not least because it is impossible for them to fall further. The government will have problems getting its debt away and this suggests higher rates, and supports asset price deflation.

As western currencies go down the pan - you can expect commodity exporters to want a lot more for their commodities and this suggest commodity price inflation.

The real problem is identifying any sector of the economy that can lead a country of 60 million people out of recession/depression. To my knowledge no-one has ever suggested what this mught be.

If things get too bad a lot of the existing global companies (say oil companies of drugs companies) can the exit the UK almost as fast as the plane will carry them.

I have been really gloomy for about 5 or 6 years....at least whenever I thought the economy (aka how rich or poor I'll be in the future)

I don't share the views of those who have touted the last few months shares rally as signalling at least the beginning of the end of the recession---but I do feel the changes that have shaken, are shaking and will continue to shake the Financial world, Big Business, Politicians and so forth do at least signal an end to a whole decade where everyone (at least who appeared in print, Tv or radio) seemed to be in denial about the dangerous fragility just beneath the surface.

At least now it feels as if, bear market rallies not withstanding; there really are fundamental movements which, lets face it are beyond the control of Governments now; are forcing more realism...and eventually more stability into the system; almost against our 'best efforts'.

The MP's expenses thing intersects with the 'Fat cat bloated bankers' thing as examples that there is a re-emergence of a sense of ethical behaviour above and beyond what 'one can get away with' or one can 'charge for and get away with' is surfacing...almost like a submarine breaking through ice.

It's the morality, stupid..... without an understood moral and ethical system every contract and set of rules is so much empty rhetoric anyway.

It may just be that idealism and a sense of shared values; 'beyond the contract', are to be the new reality----that's why I feel a bit more hopeful now, and was so gloomy back in the recent good old days.....despite the lousy next few years as we cancel the holidays and pay back the debt with taxes (should we manage to keep our jobs)

Britain spent tomorrow's tax revenues/earnings on yesterday's over-consumption.

Now and in the future, the British government must borrow to pay for the bad debts of the UK banking and insurance sector.

In other words, we are forced to borrow in order to afford today's necessities.

Faced with this lack of funds, there can be no internal investment in Britain's public services or Britain's productive capacity. High taxes and high fiscal deficits will put the mockers on any hopes of internal investment. This will hold our economy back for many years to come.

This is a crisis, and not a recession....

#6 mrtweedy

anyone who was foolish enough to take out a 125% mortgage in the UK or a sub-prime or 'liars' mortgage in the States probably also did it at 4 or 5x income, so their debt load to personal GDP was probably running at about 600%; maybe 7 or 800% when you add in all the credit-card and car loan debts etc

now I think we would all agree that that really IS TROUBLE (though the banks, govt etc didn't see a problem at the time.....)

when the US and UK debt-load gets to above 200% of GDP then let me know as it might be time to panic

in the meantime I think I'll stay in my hammock under the walnut trees, drinking beer and making a herculean effort to try and remain calm and I look forward to the dim-witted Tories trying to remain popular whilst raising taxes and cutting public services to the bone

#24 Somali_Pirate. I think I read somewhere that you are now back in North America - this may account for your seeming gullability in swallowing official spin.

The UK gross external debt to GDP ratio stands at 336% (Q4 2008). This makes it the second most indebted nation of any of the 50 largest national economies in the world.

The US is better placed with a ratio of 95.09% (Q3 2008). Clearly since Q3 of last year the US has stepped up to show that what makes America great is its ability to ruthlessly compete. I fear that the US may yet overhaul the UK.

Check out https://www.cnbc.com/id/30308959?slide=1 for source details.

watriler (#3) "After the inevitable defeat at the general election the 100 to 150 Labour MP's will need to focus on purging the party of New Labour adoption of Thatchernomics and develop sound radical policies on directly managing the economy including a significant sector of publicly owned enterprises (incl some banks)and maybe after the next but one election....?"

If they don't purge their Trots/Neocons soon, and do so very obviously, it will be too late and the country will just get another team of the same in.

#25 armagediontimes

I am indeed in Canada and hence bringing unwanted sunshine to your gloom-laden British blogs; the gullability of the Americans is well known to the British but I'm not in the US and don't really care what the British think of the Americans or vice versa

I was referring to the 100% net debt to GDP ratio figure mentioned for the UK in the original report and by Stephanie, not your gross external debt ratio, so you are moving the goalposts and I'm not interested enough to look all this info up; the net debt ratio is allegedly about 53% at the moment but that probably omits PFI and all sorts of stuff - personally I assume that most of the figures we see about the economy are spun, manipulated, statistically fiddled about with etc; nevertheless the UK's current and projected net debt level is lower than several other G8 countries...... on that yardstick

perhaps you are right on your yardstick; I have no idea but if I were to bet on it then I would guess that neither is correct and that we're wasting our time discussing it!

#27 Somali_pirate - I don´t recall expressing any view regarding Americans other than noting their famed ability to ruthlessly compete.

I am not in the business of moving goalposts - merely in seeking to establish the actual location of the goalposts. A task that is complicated by the seemingly endless fug of obsufication that emanates from all official sources.

I don´t really care what either you or Stephanie Flanders thinks unless either or both of you intend to personally step up to buy a few GBP billion of newly minted UK debt.

My bet is that none of the likely buyers believe for one nano second the official guff that you are so keen to propogate. I care about this because people don´t like being played for patsies - and these particular people will most likely extract their revenge through demanding higher interest rates. Rates that I personally get to pay. Perhaps there is something wrong with me but I have an aversion against being dragooned into paying the cash price of other peoples spin and deceit.

Perhaps you take a different view - in which case you are more than welcome to pay my share.

It's almost inevitable that confidence in Britain is reaching an all time low, we have a government which is failing to govern because it is applying all it's energies, not to getting out of the crisis, but to salvaging as many seats at the next election as it can. Thus it cannot take the measures that should be taken to curb public spending or to rectify any of the problems it caused , which made the crisis even worse than it should have been. Now , until there is a new government in office, confidence in Britain's economy will not return, and it is doubtful if there will be any inward investment as long as there is a danger that Brown and Darling will raise the level of debt even further. The growing evidence of this government's incompetence is now obvious to the rest of Europe and indeed the rest of the world, and there will be no hope of recovery until what has become a totally ineffective administration is removed from office.

A FEW MORE NAILS IN THE NUlabour project THAT'S BUSTED THE UK ECONOMY.

AAA? ZZZ MORE LIKE FOR ASLEEP ON THE JOB FROM THE FORMER CHANCELLOR TO

THE BANK OF ENGLAND AND THE FSA.

LOTS OF REWARD FOR FAILURE!!

#29

Cuts in NHS spending all ready happening ( 10% on capital projects/overtime bans/ agency staff cut back/ 'bank' staff under 6 months employment being laid off) just seems that they are doing it on the qt and at the mo, no-one has noticed

#28 armagedion strewth, you ought to read your own comments before replying, as your short-term memory appears to be shot

I am not propagating official guff and have no time whatsoever for any political parties, govts or official economic statistics, none of which I believe; I was simply saying that the debt % figures are not worth getting het up about as they are invented anyway

Is that so hard to understand?

Beats me why you guys squabble about something you can do nothing about. What does it matter what the debt is or the what the interest rate is going to be. The debt will crystalise and whatever rate the market demands will be paid. Joe Public and Joe Dole have little to do with it, they just pay. I don't remember any politican asking about anything much, war, millenium domes, engineering booms that arn't booms, engineering megabusts, sliding loads of money to banks, etc etc, asking if I wanted to help out with moat-ability or duck island. Why on earth are you bothered.

For goodness sake stop moaning!

Things are difficult in every country in the world - including China. It won't make a blind bit of difference in the long run which political party is in power in the UK because the problems that they are trying to solve are beyond their control.

So, if Cameron wins the next election and cuts public spending AND raises taxes, it won't solve the fundemental problems that the country faces. We really need to take a good long hard look at ourselves and decide for ourselves what kind of society we want to build and then set about building it before the rest of the world recovers and decides for us what kind of society we will have. This is an OPPORTUNITY but as usual we are blowing it!

e2toe4 in # suggests building a new economy (which is a reflection of society) upon moral standards. Seems like a good enough place to start. Then let's define what we really mean by a moral society and economy. We know that we have a very unbalanced economy. We have our own experience of loseing manufacturing output and we have the experience of Germany and China to draw upon. So what type of manufacturing should we specialise in? Let's start asking ourselves what we want and not let the vested interests impose their desires upon us.

Oh but we are so much in debt. Debt is only a frame of mind - after all it's only money and not life or death.

"We're talking about nearly nine hundred thousand under 25 year olds now and when the class of 2009 graduates, there will be more than a million.

"This is everywhere around the country. This is not just unskilled people. Its people who are leaving the universities of Glasgow and Edinburgh and London and Exeter. It's a whole generation of people spread across the spectrum who we can't write off."

Prof D Blanchflower, due to be on Newsnight later tonight.

---

Can I point out that this is the important issue. Not people with money whinging about having a little bit less or paying a bit more, or fussing on about their pension being a bit smaller. Quite appart from anything else who does anybody think is going to be paying the tax to pay for public services in the future. This is in all likelihood the creation of an economic caste system and it will have a profound impact. The effect of HMG policy, and it has been a policy by default or design, as apparently tacitly endorsed by most of the older UK population, has been to extract money from the younger generation via housing, and now it is to extract employment from the younger generation. Does anybody really think this will create a balanced society well motivated with the young participating in wealth creation. Dystopia.

I hear increasingly of young people fleeing the UK. Brilliant. That is really going to help just around the corner. Unfortunately I cannot help but agree with what they are doing. Now wasn't somebody saying something about more young being needed to avoid the ageing population pension problem.

Anybody for economic Solyent Green.

Roll on the GE.

FACTS THAT DON'T MATTER

[Unsuitable/Broken URL removed by Moderator]May 1995Feb 2007

glanafon

SOYLENT GREEN SUMS IT UP. Misery for all except the SPECIAL FEW?

All will soon be run by TESCO with GORDY as the NEW CHAIRMAN!!

FrankSz #7.

"We are looking at Asean move away from USD." and "The USD will either slide slowly over some years, or hit a catastrophic point and drop suddenly."

is probably the best news possible. the US is holding the world to ransom with their Dollar adn their "economics", time to bring in a global currency.

Oh and only a mere 8.5 billion borrowed by PRUDENT GORDY & DARLING IN

APRIL. WHAT WILL BE THE DARLING BUDS OF MAY:9.78 billion I ESTIMATE!!

#32 somali_pirate - My memory is fine both short and long term. If the % debt figures are invented anyway then why do you reference them?

#33 glanafon - I think you will find you have answered your own question in post #35. Let me explain yourself to you.

Moats, domes, ducks or their islands are irrelevant from a macro perspective as none of them has the potential to materially harm the country.

The national debt level is of a different order of magnitude and clearly has the capacity to cause harm. Why is it so difficult to even identify and agree what the level of debt is? Partly because of a number of sleights of hand - such as PFI and unfunded pensions, and partly because the media refuse to report the actual figures, or report a vast proliferation of different figures so that no-one really knows what is going on.

Why do the powerful engage in such behaviour? It is not because they are stupid as clearly significant intelligence is required to obtain such complete opacity. So it must be a deliberate act, but why do they do this?

Luckily you tell us why. They do it because they are out to con the young - those trusting, idealistic people who naturally assume that the world is their oyster, and never realise that it is really their clam. Their only hope is for someone to effectively shatter their illusions and to free their minds so that they at least have a chance of avoiding economic soylent green.

It may sound cynical and cruel - but to my mind it seems a lot better than the planned alternative, and judging from your comments you would agree.

When you are actively planning to eat the seedcorn surely you must see that the game is up and meltdown is unavoidable.

glanafon,

That we have to develop an economy that has prospects for our younger people is undoubted. That we are facing the prospect of an 'educated unemployed' (despite what JJ says) is true. All of that adds to the call I made above to really start thinking about what kind of society we really want to build.

However, even though I am starting upon my dotage, when I was young, I couldn't afford to buy my parents house. I didn't earn enough. My expetations were much lower. In fact, the first home that I owned was a very modest maisonette that we bought after we'd been married for a year (oh the joys of only having an ironingboard for a table!). To get the mortgage we had to have saved with a society for over 1 year! Therefore, even though the sums have changed there is no difference between now and then as far as housing is concerned.

As far as pensions are concerned you have more of a case. It has been apparent since the end of the 60s that we would reach a point where there would be more retirees than workers by 2010. Despite that we still have the lowest Old Age Pension provision in Western Europe. I would therefore strongly resist any attempt to reduce it for the benefit of the 'young'. I paid every demand made of me for NI in a contract with the governments of both parties to provide a pension when I reached retirement age. Selfish, well probably but! As for the state of occupational pensions, we could argue that for years. Don't blame those who are old for the mess.

Ah well it will work out somehow!

Oh look at this. The USD rapidly declining with the pound slowly rising. This is a bit of a new one. It's good for me - I am waiting for the USD to drop to 10CZK to the dollar so I can order a turbo kit for my car.

40 arm n leg

I see moats n gravy boats and national as directly related to national debt. They are all symptoms of the same culture. If those responsible for regulation are interested rooking the system then flippin heck, look what you get. People flippin the economy.

My position is I don't know what size the national debt is and I don't know what interest rate is that will attract Johnny foreigner, I doubt anybody does. I do know it has to be paid. I don't see much point in expending energy on the detail because I only have so much energy. I do not see what I can do about it. I can do something at the GE. That is about it. To ensure, as far as possible that parliament is on the right track, and it helps because they are the regulators. I can't get hold of multinational banks and nor can you otherwise I suspect you would have by now. The control loop in a system is always smaller than the main flow it operates on. As the moat is smaller than the RBS debt. But the moat is important. Few will forget it. It is an icon. Here is an emoticon : )

Increasing numbers of unemployed, including educated young people
Over-indebted businesses and households
Large trade deficit
Increased taxation
Falling asset prices
Large public debt
Rock bottom interest rates
Savings shrinking, as CPI outstrips interest earned
Increased business and personal insolvency
Weak sterling
Weak dollar
Falling value of pension funds
Public sector cutbacks

I wonder if all the above are somehow connected?

I guess they are just a state of mind, and will all go away if we just think happy thoughts.....so no more bears please............

44. MrTweedy wrote:
"....(long list of problems)
I wonder if all the above are somehow connected?
"

Don't you mean "I wonder if ANY of the above are somehow connected?"

I cannot see anything in the proposed Tory economic policy statements (and heaven knows they have been trying to make as few as possible) to provide any more encouragement that they have any 'answers' or at least any more answers than the present government.

As I see it any 'recovery' based on inflating house(asset) prices is not a recovery at all. Thus all economic policy that has as a consequence the re-inflating of asset prices is ipso facto wrong ab initio.

A sound well balanced economy requires that interest rates (the cost of capital) is raised from the 300 year lows that we have at present. The consequence of this not being done as soon as possible is the inevitable disastrous skewing of the economy to supporting the uneconomic and financial non-viable as against supporting the financially rational. Savings must be increased as a proportion of GDP and policy is also working exactly in the opposite direction.

41 foredeckdave

A sector failing is a sinking ship that takes many down with it - social class or the education of those on board does not stop it. Bit like the Titanic. And the band played on. And despite skills being transferable to other sectors in practise there is resistance.

I am not sure you can 'build' a society. They evolve. In view of the damage HMG is capable of I would not want them 'building' anything other than a padded cell for themselves on duck island. And no plug on expense please.

UK housing now significantly costs more than the historical average earning ratios regarded as sustainable. Monthly costs are being held down by abnormally low interst rates and that will not last. All involved in housing have been manipulated via supply and demand on both with planning (HMG) and finance (HMG and Banks). Housing at this point remains almost certainly too high in price as a direct result of HMG and Bank failures. Simple as that. In a housing boom those on the ladder benefit, they are older rather than younger. I dont recall many saying I dont want my house to go up. Nor do I recall 4 million households saying give me negative equity, and lock me in to this property, which may well happen.

Most public funded provisions are paid on a rolling programme, ie out of current earnings. The illusion is money is put to one side for future payouts but it isnt, it never has been, it is funded by current income. If you hold a private pension it is different to a state pension as the funds are seperate. It will matter little if you have a private pension if public services fail because you will be busy paying for access to healthcare and the like. As existing pensions are now judged too high to be sustainable how do you think that will be dealt with. Could it be paying for more services, ie less service provision, or reducing pensions by one means or another including skewed taxation. Or both.

''Don't blame those who are old for the mess.'' So who do you suggest are to blame - those at school, those not born yet. Whether you like it or not the older generation has been part of the process of stripping opportunity from the young. I do not blame individuals for that as such, I do blame the group for a lack of social conscience. You are also seeing a government pandering to the majority of an electorate who are older. The government in part reflects the aspirations of the public. Look at the way it runs, not the way it walks and talks.

To talk about 'building societies' is dangerous. What is needed is ethics that is all.

No.45. John_from_Hendon

Britain needed to begin paying down its debts, and asset prices needed to fall from their over-inflated highs. Unfortunately, this correction is happening too fast; so the BoE has cut interest rates and increased liquidity in order to try and reduce the pace of the correction.

However, given the high speed of the correction we have ended up with a severely contracting world economy, which in turn brings further problems.

Britian and the USA were hooked on the debt drug, and should have been weaned off it slowly. However, we were froced to go cold turkey, with the result that our economies have gone into shock and threaten to shut down their vital organs....

The only solution is to flood the economy with liquidity, in order to try to bounce the economy back into life, and then attempt to try to reduce the debt levels in a more controlled manner, through increased interest rates and lending controls. However, it's all a massive gamble, and there is a significant risk that it will all end in disaster.

45 John from

The problem re policy is simple. Because Brown has always made it plain he would not go we have to wait for a GE. Electorates do not tend to favour being told they will have services cut and be taxed more. So we are in a dutch auction where all sides try to avoid giving a strategy. Sooner or later Brown has to, but in the meantime he ducks the issue and continues spending because the electorate like it today. There is no imperative for the opposition(s) to state what is inevitably a bad case until Brown has, so the whole issue hangs, to the detriment of the country, which is all S&P were saying. Whilst anything is possible Browns position is next to impossible, nobody has ever come back from his sort of ratings so he expects to be out. That is why there are no policy statements other than rhubarb about efficiency savings when it is far more likely much worse will be needed. In the meantime the word has gone out to public funded bodies to prepare for cuts probably in the region of 10 percent at some point and in response stealth cuts have started. Forked tongue.

Oo. I have just had a bit of a spooky thought. You know, deflation can be seen as either:
a) a drop in confidence in the future value of assets in terms of money and other disincentives to buy
b) a increase in confidence in the future value of money in terms of assets and other disincentives to spend

If you are a relativist then a) and b) are the same. I put it to you that QE and other such inflationary measures rely on that kind of relativism, but what is actually happening is
a) Low confidence in the future value of assets remains
b) Low confidence in the future value of money increases
This is because there is always some alternative money that can be used - to save in eg: gold, Euro etc. In a sense QE just sparks off a race to the bottom between nations for lowest confidence in their currency! The only survivor has to be a reserve whose quantity cannot be easily manipulated.

I still find it incredible that people think a General Election will make any difference to the economics of all this. The papers still hang on every last opinion poll as if the vestiges of the old tribal entrenched political parties matter. ITN News (whisper it quietly here) last evening had well below 50% planning to vote in the next election. This sort of disengagement is what ushered in the Nazis in 1930's Germany. The expenses fiasco has been a necessary cleaning of the Augean stable but is essentially a distraction from the enormity of the economic and moral problems facing the country. The old term 'Life Choices' comes to mind, when speaking of lost generations of unemployed.
People are free to wish for a general election and blame who they like, but face it we are all culpable even marginally. Sadly most do not have the interest, intellect or capacity to appreciate let alone make the decisions needed to get the UK on an even keel.

Stephanie, could you or someone else enlighten me please? Debt of course is a principle amount that one owes and must be repaid with interest over time. However, due to the [Unsuitable/Broken URL removed by Moderator]PFI FIDDLE, there are also contractual future obligations to pay which, originally at least, were "off balance sheet" and did not technically count as public debt. I believe that new EU rules disallow this accounting practice.

Nonetheless, it has all added to what we and future generations must pay in the coming decades for alleged benefits and investment now. Did the ratings agencies take this into account before, and are they doing so now?

(Not that I really care too much about the ratings agencies. In view of their track record. I believe that there should be new international legislation to curb them and, in particular, to force them to declare any actual or potential conflicts of interest.)

glanafon ""Whether you like it or not the older generation has been part of the process of stripping opportunity from the young."

So true: One reason I will never forgive the New Labour Government. They were of the generation that had it all, student grants, final salary pensions etc. For many of today's youngsters, our leaders have pulled up the ladder which enabled they themselves to rise and prosper.

Historically, since enslavement for debt has gone out of fashion, unsustainable debt has always ended in repudiation or in inflation (a politer form of the same thing.) Thus the moneyed classes were greatly diminished by the inflation of the first world war. (Of course, the non-moneyed classes often lost life and limb and breadwinner instead).

I'm not quite sure why the PFI link was removed. To see a measured analysis of some of the issues, click below

https://www.thefirstpost.co.uk/

Then enter "PFI truth" in the search bar.

The writer expresses the opinion that we don't actually know whether the PFI offers value for money, because the Treasury is unwilling to do the research.

Of course, PFI contractors have been major political contributers, so it hasn't been in the interests of the politicians to ask the right questions either.

Saint Vince Cable also called for an election on Question Time last night, as did the audience.
Somebody with a mandate for change at some point soon, must take an axe to the enormous number of non productive jobs in the public sector or this countries economy and its triple AAA rating will continue to slide down the pan.

#43 glanafon - OK moats and gravy boats and things are clearly symptomatic of a likely wider problem, - but of themselves they are not a problem other than emotionally and ethically (which I accept is itself a big problem - but a different problem).

If you don´t know what the national debt is then you cannot know that it has to be paid as clearly it is possible to have a debt so big that repayment is impossible under all circumstances.

The problem is that no-one knows what the debt is and that is a problem because it should not be hard to quantify this number. This all comes back to the systemic fiddling of statistics. Even if you know what the debt it has to be compared to something - GDP is a reasonable comparator. However it is beyond doubt that GDP has been fidddled upwards, and so you just re-enter the cycle of obsufication and confusion.

I agree with you that seeking precision in this matter is a waste of time, but seeking to understand the underlying trends is not. This is because I do not wish to see the young shafted any more than you do.

If they are to be advised to leave, or not to return then it is important to understand the basis on which such advice is given. If people do not accept the validity or accuracy of the advice that is of course entirely their perogative. But if you can see a problem and do not mention it then surely that is wrong.

I will be very surprised if you can do anything at all at a general election. The only possible alternatives are Labour or Tory, I would assume that Labour will lose. Whoever wins will do exactly as Washington tells them. The only other alternative is that people are so fed up that a whole bunch of single issue loonies are elected, but even that doesn´t matter much as big business does not pay that much attention to Parliament.

#53 sashaclarkson. Is it not the case that Private Eye have asked a lot of questions about PFI, and that their conclusions are fairly unambigious?

Tell me did you become aware of a growing problem of superbugs in hospitals before or after you became aware of PFI.

#47. MrTweedy and
#48. glanafon:

But what evidence is there that an election will make any difference? It is my belief that asking for an election is simply national procrastination. All that this does is let the permanent government of the country carry on as business as usual. Even if there was to be an immediate election it will take a year or so before the new government's polices are turned into action, even if they had policies in the first place!

Do you recall the doubling of VAT by the incoming Tory government under Mrs Thatcher? Do you recall the Poll Tax? And these were predetermined policies.

The guys at the Bank of England, the FSA and the Treasury will continue to dictate policy and continue to dictate the wrong policies of generating a pseudo-recovery by asset price inflation as their only club in the arsenal of economic weapons. You cannot hope to 'work towards' doing the right thing in policy terms, just as you cannot be a little bit pregnant! The interest rate weapon's use is insane and was always insane. I see no reason why quantitative easing could not be combined with a rational interest rate policy, not the present insanity.

I do not accept the argument that rates have to be set at zero or the whole borrowing economy will collapse. All the policy has done is increase rate margins for the benefit of the banks and at the expense of the investor and saver. This a short term recipe for disaster and it is critical that it is reversed immediately. I think there is an absolute certainty, not 'a significant risk' that it will end is disaster! The policy is contrary to even contrary economic policy - no economist has set out to destroy the value of money in such a determined and insane way ever in the last 300 years!

WE have reached a three century low in monetary policy, in public probity, in private greed - this is a recipe for revisiting the Glorious Revolution. (Prince Charles even has the right first name to echo his namesakes journey onto the scaffold outside the Banqueting House!!!) Policy must be reversed as it is wrong if we are to save the Nation from turmoil. It is not yet too late but the clock has reached one minute to midnight! The 'wise men' (at the Bank and Treasury) in charge are leading the Nation to destruction.

#56 armagediontimes

Oh yes, Private Eye have been gunning for the PFI since the last Tory govt introduced it. (I have been a subscriber for years, and have hardly missed an issue since 1971.) I personally believe they are right, especially in the light of anecdotal evidence I have heard from friends in the NHS and education sector.

However, although PE does tend to get things right, I wanted to post something more neutral, as PE is a campaigning magazine. If we had proper government analyses, it would be possible, for say the Public Accounts Committee, to examine and pick at the official figures.

MRSA etc have, of course been around for longer. I first became aware of that when there was a BBC (Horizon I think) programme about it in the early '90s. Then it was brought home about 12 years ago when a friend had a hip operation which went wrong because of infection. He survived, but has never been able to use the leg again.

Before the crisis, the political choice was:

New Labour = Free marketeers, who spend all the profits

Conservatives = Free marketeers, who give the profits back to the private sector

Liberals = Isn't Charles Kennedy a nice man?


Now, the political choice is:

New Labour = Free marketeers, who will be forced to borrow and cut spending and increase taxes, to pay for all the losses racked up during the excesses of 2001 to 2007

Conservatives = Free marketeers, who will be forced to borrow and cut spending and increase taxes, to pay for all the losses racked up during the excesses of 2001 to 2007

Liberals = Isn't Vince Cable a jolly nice man?

Private Eye also great on the Railways, Farming and the money pi$$ed away on the large and never ending Government IT projects, which surely have to stop.
These IT projects are almost as pointless job creation schemes as having benefit scroungers watching daytime TV.

The GE issue is pertinent.

Whoever gets in - which is highly likely not to be Brown - will be shackled with the debt mainly built up with Brown, and the structural problems which have been building up for decades. They will however have the opportunity to disavow the policies that got us here and set a new path. I fail to see how Brown can do this, ie disavow his own policy history, and until this step is taken then we are in the current hung policy mode.

If you think a non-policy mode is good for anybody you are mistaken, as S&P have quietly tried to say. There is a need to set a new direction. This is done by government not business. It is because business has been setting policy not government that we are here. Business seeks to monopolise and exploit - government is there to regulate and prevent exploitation by ensuring competition occurs. Both are healthy in balance.

When government bows to business then you get this mess, quite apart from anything else because business never usually is allowed to get its own way, when it does get it, it then does not know how to behave because it is new ground. It continues to push against barriers that no longer exist so moves too far and runs amok. Recognise it. The end point of the game is when government waives competiton rules and colludes with business to create monopoly. Lloyds anybody? Incidentally having allowed Lloyds to gobble up HBOS it is ineveitable that at some point the whole thing will have to be broken up under competiton rules. Maybe not, maybe they get away with it, that was Blanks gamble, knowing that Joe Public, HMG, shareholders and employees would probably pay for the deal so it was worth a go.

The start point in sorting this mess is government, just like the starting point of this mess was government failing to do its job.


51 sasha

Repeatedly ingenuity has been used to move figures off the public accounts using mechanisms such as PPP and PFI. The problem is higher costs result due to profit requirements from private sector involvement and liability cannot be removed. If all goes well the private profits are taken and the public pay, if all goes wrong then all liabilities and default costs suddenly show up on the public accounts.

If you intend buying a facility why would you use a middle man which increases the costs and does not mitigat liability unless you wish to hide the matter. Similar ingenuity was employed in privatising utilities. Models which did not yeild the maximum point of sale income were dispensed with out of hand. Eg keeping the infrastructure in public ownership and buying in private management. Assets where sold as this gave a high price.

It is inevitable higher costs are seen by the consumer in these stunts because profits have to be paid in the private sector. The principle objective with utility privatisation was to remove the cost from the PSBR, ie off accounts. On has to be concerned that moving costs off public accounts and replacing them with more new costs on the public accounts - so the declared volume remains the same simply indicates steady expansion of public debt. And ever higher payments required by the individual.

#58 "John_from_Hendon"


#47. MrTweedy and
#48. glanafon:

But what evidence is there that an election will make any difference?

It might not, but this lot have been so egregious, that they have to go - "Pour encourager les autres"*. (And it won't be an injustice as it was for poor Byng.) Brown can't correct mistakes that he won't admit he's made. Also, like most governments in power for too long, I believe they've become a serious threat to civil liberties. The Labour party has to sort itself out, or disappear; I don't care which any more, but it needs to be chucked out for its own, and the public's good (in reverse order).

I have few hopes for Cameron, and even less for Osbo the hedgies' friend, but we can get rid of them next time if/when they fail to perform.

*To encourage the others" (to the mods, please don't remove this just because there's a French phrase: it's a widely in English literature.)

QE is working like a dream; the markets are surging ahead in response to future prospects of economic growth and a strong recovery by Christmas. Don't write-off Gordon - what price a mini-boom in house prices by this time next year? After that, well, who knows and who cares?

57 john from

''I do not accept the argument that rates have to be set at zero or the whole borrowing economy will collapse. All the policy has done is increase rate margins for the benefit of the banks and at the expense of the investor and saver.''

I have never argued for low interest rates, and in fact high interest rates remain available. I see the low interest rates as a way of getting people with money to chip in to pay part of the mess bill, simple and as crude as that.

GE - I have commented about in the previous post. One minute people are saying BoE policy is politcally driven and the next somebody is saying a GE doesnt matter.


59 Mr T

Labour due to internal struggles were at the point of lurching left when Brown brought back Lrd Mandelson. They are likely to lurch left again shortly as internal struggles again develope. They cannot move right or stay as is, so it has to be left. Tories to consolidate on centre ground, caring and sharing baby blue. LibDems who knows, maybe influential or maybe a parrot on somebody elses shoulder, I have no idea, they are just there like a mystery shopper, you know theres one about but you can't be sure and you can't really identify them but you are sure they are jolly nice.

Gotta go.

#61 glanafon
I agree with everything you wrote apart from this: "because business never usually is allowed to get its own way" Alas, there have always been favoured businesses, like banks, and the Road Lobby, with embedded links in government, whereas others have been out in the cold, like manufacturing and (in the UK) smaller scale agriculture.

Ah well, like you, loads to do. Computer's off for a day now (I hope!):-)

Britain should adopt the Euro

John_from_Hendon (#45) & MrTweedy (#59)

Time to call in the Vogons?

Is Labour trying to do a purge? How come my satire was blogdogged when she says it too? Is blogdog in on this?

PS. Head_in_sanders, see end of yesterday's blog for further enlightenment/punishment ;-).

No. 63. LordGreenShoots

Well said.
At last someone is talking real sense on here.
(Nudge, nudge, wink, wink)

The releases of statistical information from the Governent and others bear out the downgrade (regardless of what you feel about these rating agencies - who I notice regardless of all the comments when this whole mess hit the fan, "were going to feel the full power of the law" FBI investigations etc! And most certainly haven't. WHY?).

Why Stepanie have you nor Robert Peston commented in any of your articles on the movement of crude oil and fuel prices - not only in the last two and half months, which don't tally with any of the drivers of movement - but more especially what happened between 2007 and now (why did the price start rising rapidly as it became obvious in the states(and to the global bankers) we were actually in serious trouble)? And it wasn't just oil what about all the other commodities?

Also what is happening with commodities currently - look at your own website graphs on one month & 12 month commodity movements (based on what dramatic improvements in demand? Especially if the inventories look anything like oil (going through the roof)).

May be you could expand on why specialists in these fields are questioning the movements and trends, which bear no resemblence to actual market conditions (Supply and Demand)! Plus; making comments on the involvement of large(mutual & other) funds/organisations in markets they have never been involved in before. Arbitrage at its worse - trying to claw back the losses, so many of these large organisations have incurred through abysmal management (as in these elites with huge volumes of funds to play with. Are the Pension funds being questioned? I think not).

Finaly WHY are the Insurers both here and more especially in the US delaying and fighting over the claims by financial instutions who have insured their debt (at very nice premiumes when the world was all go,go, go)? Do they not have the funds? AIG is not the only one caught up in this really serious mess (and its captian for the disaster is leaving - A sinking ship? Why are you and Preston not reporting and keeping us updated on these facts?

No.67. JadedJean wrote:
"How come my satire was blogdogged when she says it too? Is blogdog in on this?"

We don't want people posting any old stuff on here; a lack of control by the Blogdog would simply allow anarchy to flourish unrestrained.

Standards in blogging must be maintained through benign intervention by those with proper authority.

People, people what is the obsession with general elections?

If the tories win what will they do? They need to cut spending and raise taxes. What happens if Labour win? - they need to cut spending and raise taxes
What happens if someone else wins? - They need to cut spending and raise taxes.

What happens, if for whatever reason, any government refuses to do this? There will be a major run on stocks and the currency. Large companies, like big oil and pharmacueticals will relocate somewhere else. The IMF will step in, and compel any government to cut spending and raise taxes.

A lot of the debt exists because it has been raised to support banks. Most likely more money will be required to support banks. No one will refuse to support banks unless and until the US allows some of its banks to fail. If big US banks are allowed to fail - then big British banks will fail the next day.

Look at the US - what is difference between the economic policy of Bush and the economic policy of Obama? - Answer there is no difference at all.

This from Mr. Strummer

The voices in your head are calling
stop wasting your time, there´s nothing coming
only a fool would think someone could save you

Message 63 has a lot to lend to it. I have had this scenario in my mind for some time now and know it will quickly lead to terminal damage to the country. The present level of government debt is untenable; to add to it will be a disaster. Having said that though we all have to recognise that there are many who are very happy with the current state of affairs as it suits their interests.

I think the general agreement is that whichever party wins the next election, whenever that might be, has to raise taxes, cut spending and find some more assets to sell off in the hope of creating sufficient confidence to keep people offshore lending to the UK.

We have reached a cross-roads where what has been can no longer be but we have no ideas as to what will take its place.

Given that it took until 1941 to create full employment in Britain after the Depression we need to emulate the mobilisation of resources made at that time. Thankfully we don't have a major war to fight but we need to focus our minds in a similar fashion as to do otherwise will be the equivalent of surrendering to Hitler.

To rely upon international banking and insurance to pay our way out of this is just to add delusion onto illusion. These people cannot be relied upon as most of them are just fantasists playing with virtual money in a parallel world.

We need to get back to making things that other people will value so much they will buy them from us at good prices; and we can also make things for use at home rather than import from elsewhere. Then we need to make lots of whatever it might be to keep the factories going in our own country. R&D needs to be funded and investment in factories and machines encouraged. This is just the start but if we don't start soon we will be in an even deeper mess.

This is why we need a General Election soon so we can start again. It matters not who wins as there is only one possible set of policies going forward

stanilic (#72) "This is why we need a General Election soon so we can start again. It matters not who wins as there is only one possible set of policies going forward"

But aren't those policies precisely what successive governments have not been implementng by design for decades? Do you see anyone other than Old Labour (or the BNP) pursuing them?

I was in Australia when this first broke, and now I'm in Italy. From outside, your debates have an air of unreality to them. Australia is doing relatively well out of all this (the reasons are not difficult to understand) and the Italian economy is sliding off the cliff (again not difficult to understand). We're somewhere in between. Could we have sense of perspective, please?

And when you've adjusted your binoculars, have a look at how Fiat is financing its expansion. If economics is about expectations, it must also be about knowledge. Why are markets willing to accept Fiat's debt? Do they think Berlusconi will underwrite all this with public funds? Do they know?

#72 stanillic,

That what has gone can not be returned to is accepted by most of the bloggers - hooray would echo a number of us.

The proposals in yor 3rd paragraph sound very similar to the protectionist policies that I advocated months ago on Peston's blog. I would go even further by requiring all new investment (public and private) to have a mandatory element of R&D and training built into it. If we are going to re-build our economy then it has to be for the long term. I also believe that there is an argument for bringing the forme public utlities back under government control at least for the time of the 'crisis' so as to control prices. What little finance there is available should be removed from the banks and directed towards the identification and sustainance of new industries (probably environmentally focused) and the assistance of stratgically important organisations and industry sectors.

Please note that I am not proposing some form of centrally controled economy. I am however, demanding that the government take a lead in directing the effort to re-build our economic structures. Neither Labour or Conservatives appear to be offering any real long term choices.

In your final paragraph you say that there is only one set of possible policies. That fortunately is not true. There are a myrad of different policies available - some more radical than others. We need to explore them all in order to decide which will be the most appropriate.

For me, a new economy has to be based upon a more equitable balance between capital and labour. It also has to focus upon the growth of real VALUE rather than on money. It isimperative that mony is put back into it's true role as merely the oil of economic activity rather than the kingpin of the whole economy.

When I have expressed these types of views before, I have been condemned by some as falling prey to the politics of envy. I would counteract that by saying that I am not anti-capital. I am actually proposing turning the Thatcherite Dribble Down principle on its head. I would welcome investment from the likes of Warren Buffett, George Soros and their UK equivalents provided that those investments were primarilly aimed at the growth of UK propserity first and their own enrichment second.

So, what would the reaction of the international community be if we persued such policies? Initially strong condemnation. However, as we proved that we were commited to our policies as sneeking regard followed by general acceptance and support.

75 fdd

The best protectionism is to produce something that people want to aquire.

Protectionism as such is not allowed by the EU and is limited by World Trade agreements.

Forced R&D will not work. To start with what would be R&D. who would assess the compliance.

Training is all very well but trainees, who are actually paid very little and exempt from the minimum wage are being dumped. The public sector which has been largely unaffected has taken 2 percent new apprentices on under Browns scheme the rest habe been moved internally.

I doubt there is the cash to buy out shareholers of the utilities at present, it would mean more not less debt.

W Buffet et al are prepared to put cash up if the returns are likely.

You are proposing the equivalent of martial law.

It is well intentioned but I dont think it would work.

glanafon,

Let's take a cold hard look at the UK situation. Even if this depression were to last for a decade throughout the world then, the UK would still be like a rudderless yacht - still floating but going nowhere, a danger to itself and other shipping! The rocks are clearly visible and if we don't take action now then it will be too late.

You once accused me of concentrating upon what I would LIKE to see. I accept the charge happily. By so doing, I hope to provoke participants to start to THINK about how we can get ourselves ('cause nobodyelse will) out of this mess. The more ideas that are floated from the sublime to the ridiculous the better - with a litle luck a synthesis will emerge into which the majority can buy.

However, to answer your points:

"the best protectionism...." At the moment we don't know what that is and our present export results on't really give us a clue.

"not allowed by the EU" Agreed. However, experience shows that when pushed hard enough the EU will allow a derogation. We may even get support from both France and Germany. As for the WTO, who really cares?

"Forced R&D will not work" You cannot say that as we have never tried it. Perhaps some, if not all of the requirement could be met by the sponsorship of University research programmes. As for the compliance, I will leave that to the initiators.

"Training". You are using a very narrow definition. Less than half of our managers and supervisors in the UK have had any formal training. It could be a requirement that all specialist are enroled in professional institutes qualification programmes or if already members their liftime learning programmes. Non-specialists to achieve the relevant NVQ qualfication. So I'm really refering to a Learning Organisation.

"Cash to buy out shareholders" I quite agree and a waste of money. On an emergency basis the government takes rsponsibility for MANAGING the utlities not owining them.

"Buffet et al" Read again. At present their investments are return first and foremost. Nobody would ask them to invest in proposals that were not likely to make a return. However, I am toying here with concepts of equity - parity of esteem if you wish. Investing money gives no more than equal rights in the project. The level and pace of return is not driven by the investor. That may sound crazy at first sight but look at the way China, Russia and Brazil are approaching inward investment.

"Martial Law" NO WAY I am proposing that government takes a lead and is clear that any organisation taking support will be required to meet the conditions. Individual firms can do a Barclays if they so wish.

Would it work? I don't know but at least it's worth thinking about even if you decide against it. More importantly it offers more for the future wellbeing of the nation than what either party is presently proposing.

foredeckdave (#77) ""Training". You are using a very narrow definition. Less than half of our managers and supervisors in the UK have had any formal training. It could be a requirement that all specialist are enroled in professional institutes qualification programmes or if already members their liftime learning programmes. Non-specialists to achieve the relevant NVQ qualfication. So I'm really refering to a Learning Organisation."

A reminder of why it's all far more of a challenge than you credit (even leaving Leitch (2006) aside).

foredeckdave (#77) Two heuristic questions for you:

1) What is 'learning'?
2) Why is 'shared-environment' considered so unimportant today?

Some Proposals (just to get things going!)

1. Publish the full income details and full expenditure details of everyone receiving an MP's salary or more.

2. Wealth Tax on everyone worth as much as or more than an MP.

(NB above points - tongue firmly in cheek)

See what I mean - public outrage, and the present polled desire for an election now from two out of three of the polled population - what can it achieve? Except, that is swapping one set of self publicists for another whose financial credibility may or may not be just as suspect!

The people want vengeance - I say let them have vengeance - fire the Bankers and 'Wise Men' who created the crisis that is at the root of all this. The government's, and opposition's, mistake is to ally themselves with the troublemakers just because they want a job with them when the 'retire' from parliament - which may be quite soon for many of them. Both parties can redeem themselves by taking it out on the Governor of the Bank of England, the MPC, the FSA and the Treasury Mandarins. If they fail to do this they will inevitably inflict damage on the country far long lasting than that on the economy. (See Archbishop's of Canterbury's statement.)

77 fdd

You are setting a monumental target which is likely to fall over before anyone gets remotely anywhere near achieving it. Meanwhile one in five children live in this situation -

''Today, children in Britain live in more fear and ignorance of each other. The well-off are ferried around by car, told not to walk down the wrong street - and, if they do walk, told that other children are dangerous and not to be mixed with. Poorer children are told they are worth less in comparison with others. They are labelled as failures in a country where we avidly count academic qualifications. Poor children are told that they are poor due to the fault, failure and the lack of "responsibility" of their parent(s).'' extract from the Guardian.

Does anybody seriously suggest that the 1.2 million that will lose their jobs in this mess are freckless benefit scroungers. They will however be poor. This is in addition to the 1.8 we started with. The benefit scroungers image is just an excuse to scapegoat.

This oppressive situation for a large number of kids is hardly helpful in developing capability and success in later life. this is one of the reasons for the under acheivement in this country. This is why many kids go through education but end up underachieving. Why we then end importing people from overseas to do skilled work - its easier than sorting the problem of the countries own children. It is a ridiculous waste of resource. But when some of the older ones in a population want to act like teenagers and it is adulated what do you expect.

Anyway to try to answer some of your points.

I do not share your enthusiasm for conflict with the EU and the rest of the world on trade. The UK has to trade with somebody. The issue is reducing imports and that is happening. If the UK has to be poorer to reduce imports then that will happen. If protectionism was introduced then multinationals would look hard at being here.

R&D - I have worked in R&D, it is expensive. A large business will only usually spend a few percent, 3 or 4 max of turnover on R&D, although there are a few exceptions. This means that you need large businesses to fund large R&D programmes it depends on the sector. Small businesses can be innovative which is slightly different but they will never fund large R&D programmes. So where is the new R&D to come from. Particularly as large companies are shrinking. The cost of R&D is why cross national programmes have developed, relating to the very protectionism you want to introduce. Protectionism would probably stop this sort of R&D.

How does taking control of utilities help, particularly if ownership remains private. It would be challenged in court anyway, and quite rightly. Further the government has no expertise in managing commerce. The problem with privatised utilities is they demand dividends paid to shareholders so cost more. And you can only sell them once.

Training - well uni fees are set to rise probably to 5K pa. Fees havent stopped people going to uni they say but I do believe they do, and they clearly impact on choice with students who are poor making decisons because of funds not ability. Apprenticeships are in trouble. And by that I don't mean burger outlets, I mean old fashioned trades. Apprentices are being laid off or not taken on. Browns initative has had very little impact it would seem. On the job training is usually very limited. It may be worthwhile but it is limited. As soon as anybody attempts to learn anything serious it needs the support of the employer which is often absent and you cannot force support anymore than you can legistlate ageism away.

Investment etc W Buffett. The government has no money spare. EU funds are conditional and limited. You cannot expect to gain private funds without relinquishing control and giving a return. Innovation is difficult and not all propositions work so VC demands high returns to cover losses elsewhere. They will not get involved without prospects.

If you are referring to the way the MIT (ministry of industry and trade) in Japan was reported as working (1970s) - that worked at the end of the manufacturing line, ie attempted to say to Japanese industry - you produce and we will help with disposal, ie effectively dumping of excess units. It ran into trouble due to resistance to dumping in Europe and the US but did help investment in production units and hence R&D. It was a device of its time. It could not work now in all probability.

Would your strategy work. Sadly, Probably not, that is the reality, most developments do not work. That is why innovation is difficult, it inevitably involves failure. Even when failure is advised as likely those involved in support expect a different outcome then get disapointed. Do you think failure is helpful in a crisis. You are seeing many initaives failing at the moment. It all weakens credibility. Particularly when it is politically sold as an immediate solution.

The issue is growth. Not stability, not decline, growth. Once you have growth then if the growth continues you can end up with something worthwhile. The recession will create opportunity but if growth comes it has to be slower than many will want, but that is reality. Benefical intervention in processes is very difficult. Making money available really means making public money available and that diverts resource from elswhere. Funds will not be made available casually. Further - Simply the fact the money is made available will create ghost activities which are designed to look like whatever the funding is for simply to get the funding as an end in itself. This is IMO already an effect with some public funding. And sometimes those involved with dispensing funds end up being pressurised into the game to meet targets IMO.

Prof D Blanchflower has said the issue is a lost generation, and I agree but he has not said how the issue can be dealt with other than it will demand money. You are probably looking at the need to create publicly funded work and training programmes to keep people occupied. The dangers are it becomes permanent and that the support structure cannot be put in place properly so it descends into Millibands unemployed loft lagging crews for other needy groups. Which moves dangerously close to a new ecomonic casts system.

The problem is this country has lost its social conscience. It is not an economic problem it is a social one.

We are in all likelihood looking at the Japanese economic experience, the lost decade. So take a look at the outcomes in Japan, I doubt you will like them. I would guess at increases stratification of society and commerce, polarisation of classes of people. More embedded negative attribuites, less social mobility. Reduction of public funded programmes. In commerce the likely outcome is more very small businesses and very big businesses with a pancake structure rather than a pyramid structure. The big guys seeking economy of scale but lacking innovation and the small guys trying to fit in the cracks and be innovative.

I went through many scenarios during the last recession trying to second guess outcomes in order to plan what we currently do. Growth, flexibility, innovation, ethics, sustainability, future heritage, overhead avoidance, state of the art comms, came out on top and still do, although others are welcome to disagree.

Apologies for length of post.

glanafon (#81) "'Today, children in Britain live in more fear and ignorance of each other.'

I hope you don't expect The Guardian to tell you why that is so. They don't want you to know what 'shared environment' doesn't account for either.

It's 1950 UNESCO thing.

82 jj

yes I know

but you have yet to suggest much of an populist answer

shame about the tea party : )

but your nefarious rhetoric is definately improving, you havnt been at all guassian l8ly

glanafon (#83) What's wrong with a bit of state-driven family-planning? It's all the rage in China. Note how UNESCO takes a subtle, even-handed, approach to these matters?

84 jj

State driven - Nothing to object to provided it is above board and not coercive (the term was coined by Edgar Schein in 1961 in relation to his study of Chinese POWs' indoctrination)

BTW subtle is not necessarily a good word, it can imply a near neighbour, subtefuge

Your faith in the state is most reassuring

I see no fear of carrots only sticks

You do seem to enjoy a sterile debate : )

#81 glanafon. You can actually sell utilities more than once - British Energy being an example.

The Japanese example is not directly comparable. Japan was operating in an environment when most of the rest of the world was doing OK. Japàn had, and has, a modern and extensive manufacturing base, high net savings, and had minimal expenditure on weapons and defence. Even with these advantages the experience was not positive - even on a best case analysis it will be much worse in the UK.

You may not be a fan of protectionism - but you are going to get it anyway, this time through the mechanism of competitive currency devaluations.

#82 Jadedjean - This is all rubbish. You are occupying the worst of all possible positions. Even if you are right you are still wrong. The problems are all upon us right now - even if you have identified a problem there are no short term answsers, so your problem is a problem without a solution, and is therefore an irrelevant problem. Any possible solution to your problem would create more severe problems than the problem you are seeking to solve.

In fact you are probably worse than wrong. Elsewhere on the BBC there are people whinging about preceived shortfalls in the luxury transportation offered by British Airways. These people are unlikely to know how to deal with what is coming. If any refuge can be found it is likely to be in the third world, where people already know how to cope with an absence of luxury and do not have any expectation that they deserve to be hand fed roast swan (or whatever these people want to eat), and who do not have any desire to consume thousands of calories a day that their bodies do not need.

86 arm n leg times

I see you are fully charged and in full optimism rebuttal mode. It is good to see such energy about.

I am sure many are going to be introduced to the bear necessities of life. That is their problem.

JJs hope - it would appear - is that somehow somebody elses 'snip in time saves mine'

I see a few peaceful protesting Tamils, 45 days and still going has absorbed most of the police in London.

glanafon (#85) "You do seem to enjoy a sterile debate : )"

Kids are for life.

armagediontimes (#86) "This is all rubbish. You are occupying the worst of all possible positions. Even if you are right you are still wrong. The problems are all upon us right now - even if you have identified a problem there are no short term answsers, so your problem is a problem without a solution, and is therefore an irrelevant problem. Any possible solution to your problem would create more severe problems than the problem you are seeking to solve."

China is addressing it. Only Centrally Planned governments can effectively do that. Take note. Unless it is addressed it will just get worse. Read what Herrnstein and Murray proposed. Herrnstein knew a thing or two about what matters in the control of behaviour and economics (behaviourists talk in terms of parameters of reinforcement), most people don't, they beg all the critical questions.

glanafon,

Don't worry about the length - at least 2 of us are thinking about where we actually are and what we may be able to do to get us out of the mess.

I do accept that we have a major social problem and that it impacts directly upon our economic condition. Up to the 80s, it was defined by the British class system and elements of that still exist. Since Thatchers war on society the concept of working class has all but disappered to be replaced by an under-class who (depending upon your standpoint) are disadvantaged or work-shy scroungers. However, if we are to address these issues effectively we do, as you point out, need financial resources. Hence my concentration upon organisations and their development.

The investment issue is of particular relevance. Harry Enfield's 'Loads O' Money' has come to typify the UK national approach to wealth and economics. This reached its zenith last year when some think tank actually reported that the UK should abandon large areas of the country because 'wealth' was really only generated within a 50 mile radius of The City. This is such obvious and arrogant nonesence but it passed relatively unchallenged! Money was,is and will continue to be merely a process of exchange. In itself it has no value or power. However, we have built a massive industry on the back of an assumption that money is actually the prime product.

The effects of this has totally undermined our economy. Everything is for sale to whoever has the MONEY. The pressure to produce dividend superceedes the future needs of the organisation. The pressure, to fund operational costs from debt rather than savings. All of these things have wrecked the very roots of our industrial/commercial enterprises. Hence my desire to put money back into its box as a first and essential measure.

We are never going to be able to compete on a cost basis whilst there are still developing nations. Germany has proven that you cannot over-rely upon technical exports (of existing technology). Hence I firmly believe that we need to foster a national passion for technological innovation and that this has to be protected. Sure we will sporn a number of dead ducks that comes with the territory.

A spin-off from that would be that the UK returned to smaller enterprise units. Much research has been done in the UK by Warwick BS, Manchester BS and Lancaster BS on effectice unit sizes. In the UK, we appear to be more effective in units of less than 300 people. It seems to be a cultural thing. So perhaps we need to re-look things like quantities of scale and synergy (can anybody actually show where synergy was ahieved via combination?).

Finally for JJ - tombs have been written on the meaning of learning and nearly as many definitions have been forwarded. I am not about to start trying to add to them. Just take my use as refering to the general 'public' understanding of the term.

#87 glanafon - I assume you to have heard of the phrase "Take the most from thine own eye" It´s a bit rich to accuse me of negativity given that you are (accurately) reporting that children in Britain live in fear and ignorance of each other. I do not think that I can compete with this level of desolation.

#89 Jadedjean - So when is China expecting to see the results of its actions? The western economic model has probably passed the tipping point - if it hasn´t then it will within 2 or 3 years at most. Nothing you say, even if correct, is relevant against this timeline.

Are you aware that the Chinese and the Russians fell out in the 1950´s. Stalin expressed the view that a Russian first strike would account for 250 million Chinese and Mao said OK go ahead that is an acceptable loss. You will forgive me if I don´t rush to laud the merits of Centrally Planned governments.

88 jj

Quite, and the problems of the parents should not be visited on the child.

There is a conflict in your position generally and that is that you basically complain about the infiltration of government by intellectual dwarves scuttling on board, yet wish for state intevention

Einstein was proposed to by a socialite who was good looking but not a brainbox. She said something along the lines of lets have children - with your brains and my looks they will be great. Albert replied something along the lines of what happens if they turn out with my looks and your brains.

So if the state is purged of dwarves and interventionist policy is enacted the question is how long before a new set of dwarves infiltrate and the policy is corrupted. As dwarves abound and are persuasive by your own complaint. Let alone the sociopath who you recognise is difficult to identify.

At that point you have the worse of all mix as Albert was suggesting to the socialite. There are more than one outcomes possible and you seem to believe there will only be one.

There is nothing wrong with policy where people are involved and educated and fully informed and have choice.

foredeckdave (#90) "Finally for JJ - tombs have been written on the meaning of learning and nearly as many definitions have been forwarded. I am not about to start trying to add to them. Just take my use as refering to the general 'public' understanding of the term."

But as the general public hasn't a clue, one must conclude this means that neither have you. So why are you not prepared to learn? Why is all that you are thinking fundamentally misguided?

These are genuine questions.

For example you write:

"Since Thatchers war on society the concept of working class has all but disappered to be replaced by an under-class who (depending upon your standpoint) are disadvantaged or work-shy scroungers. However, if we are to address these issues effectively we do, as you point out, need financial resources."

Do you see your naive assumption here which begs the critical question?

Why is shared-environment really not very important anymore?

Why are you incapable of asking/addressing the right questions?

Writ large, this is why these problems happen.

#77 foredeckdave - You ask who really cares about the WTO. I wish I knew, but someone does.

If you are a member of the WTO you cannot deny access to your country on religious grounds. Saudi Arabia historically denied access to Jews, and then it joined the WTO. Did it start admitting Jewish people? or did it issue residency cards in Arabic to people who could not read or understand Arabic and falsely identify some of those people as Jewish, and then use its residency card data to compile reports detailing the number of Jewish people within its borders?

Apparently the WTO is all about free trade, and free trade is good. Imagine what would happen to free trade and to "goodness" if you started to game its rules. I therefore conclude that Saudi Arabia must have opened its doors to Jewish people - because to have done otherwise would be bad, and Gordon Brown was fullsome in his praise of the rulers of the KSA, and he wouldn´t offer such praise to bad people as that may lead some people to conclude that he is also a bad person.

armagediontimes (#91) "Jadedjean - So when is China expecting to see the results of its actions?"

You're already seeing them, or at least, almost everyone else is.

"The western economic model has probably passed the tipping point - if it hasn't then it will within 2 or 3 years at most. Nothing you say, even if correct, is relevant against this timeline."

How about a Democratic-Centralist revolution?

"Are you aware that the Chinese and the Russians fell out in the 1950's."

Yes. China thought Russia revisionist, i.e was giving up on Stalinism. (Golitsyn said it was a sham to fool the West..)

"Stalin expressed the view that a Russian first strike would account for 250 million Chinese and Mao said OK go ahead that is an acceptable loss. You will forgive me if I don't rush to laud the merits of Centrally Planned governments."

What about RAND and NATO's war game scenarios? Didn't they have similar calculations? You must not take Neo-Liberal (anarchistic) propaganda too seriously.

The UK's real government (Civil Service) has been systematically undermined by economic anarchists for decades. That has to be reversed. The BNP today is basically what Old Labour used to be, they're just not very good at it. What you are seeing at present is just theatrics.

91 arm n leg times

But I remain optomistic whereas you remain pessimistic, or perhaps just mystic, I don't know. I dont see much of a problem with a drop in wealth overall. I see problems with localised poverty. If people can only chose from a few types of bread rather than 20 to 30 different types what is the problem. Where is the disaster if air travel reduces. If you acknowledge the real problem is children disenfrachised for no fault of their own why are you so worried about a few pampered types having a wake up call.

armagediontimes (#91) Read this and think:- high prevalence of subversive/narcissists/psychopaths. That's what the problem is. Care In The Community does not work here.

Just to clarify - I am not aware of any such phrase as "take the most from thone own eye" - I suspect it should read "...mote..."

98 arm n leg

I hadnt heard that one

I'll put it with 'take the moat from thone expenses'

glanafon (#92) "Quite, and the problems of the parents should not be visited on the child."

But they are, and there's nothing you can do about that - that's the point about shared environment not being what matters... behaviour is largely genetic (and environment covers everything other than the genes themelves!). What the general public (educated and lay) take to be common knowledge, is false.

There are two major opposing forces converging. One is the evidence from behaviour-genetics, and the other is the dysgenic mess which has been made through promoting naive equalitarianism and meritocracy.

You (and many others) will need to carefully think about the latter I suggest.