[MikeTV]

"The UK economy contracted much more sharply than expected in the second quarter of the year, prolonging and deepening the country’s double-dip recession."

"Output fell 0.7 per cent between the first and second quarter, more than the 0.2 per cent fall economists had expected. The UK economy has contracted for three quarters in a row and is now smaller than when the coalition government took office in 2010, providing fuel to critics of its austerity measures."

UK sinks deeper into recession - FT.com

At what point do the government realise that their credit easing, quantitive easing, cheap lending, and bank subsidies are not having any discernable effect other than to boost banker's bonuses, and that what we need now more than anything else is some serious public investment?

[Squiffy]

Originally Posted by MikeTV

and bank subsidies are not having any discernable effect other than to boost banker's bonuses

Zzzz.

Any opportunity to bash the banks eh Mike? Even when it's a serious subject, and there is some good discussion to be had, you just can't resist.

Just waiting for Sharger to show up and thank the first post now.

[MikeTV]

Originally Posted by Squiffy

Any opportunity to bash the banks eh Mike? Even when it's a serious subject, and there is some good discussion to be had, you just can't resist.

It was a very serious point, Squiffy. The government only has one economic policy - which is subsidising the banks' lending activities. And they have been doing precisiely that ever since the financial crisis started, in ever more massive amounts, at a cost to the taxpayer. It clearly isn't working. It's the exact opposite of what they should be doing. They are crippling the economy. The reality is nobody wants to use banks anymore. What is the cost to the economy of that? It's the worst economic disaster we have ever seen. And it is all the fault of the banks.

[karkus30]

I wish it was as easy as borrowing even more money from the banks to fund public debt which in turn creates increased interest rates. Keynesian economics doesn't work when the economy is in this current state. The idea is to give a push when things are going in decline and not when they have reached stagnation.

Totally agree about the QE, just like a deceased patient it's time to stop the heart massage which is just wasting energy.

[Squiffy]

Here we go again.

Taxpayer subsidy to the banks in 2011 - £0
Taxpayer subsidy to the banks in 2012 - £0

Net tax contribution from the city per year - circa £60bn
Profits from the guarantees provided to banks - circa £5bn

You can keep banging this drum about implied subsidies, but it is bogus.

You can ignore the truth about QE, but it doesn't actually make any net difference to their balance sheets of the banks.

I'm out, this is another tainted and fruitless discussion.

[sidicks]

Originally Posted by Squiffy

Here we go again.

I'm out, this is another tainted and fruitless discussion.

You could have predicted that just by looking at the thread's author.....

[karkus30]

Time to print off and give everyone 50K in their bank accounts and let the games commence. The sensible people would pay down their debts and the rest would go on holiday, buy a new car and get very drunk.

[tapzilla2k]

Welcome to a Japanese style stagnation and a possible lost decade.
If we are in a liquidity trap then Keynesian economics does offer some options
in how to deal with it.

You can't really blame this on the World Economy, Osborne has made some serious errors of judgement and his arrogance procludes him from making a U Turn on his current Economic plan. Stick Ken Clarke back in #11 with Vince Cable as his #2.

[karkus30]

Originally Posted by Squiffy

You can ignore the truth about QE, but it doesn't actually make any net difference to their balance sheets of the banks.

.

Of course it does, but indirectly. QE means bond prices rise, therefore bank assets rise in response and the bank balances improve. It also means it keeps the banksters in their jobs and allows them to take large pay packets and enormous bonuses.

QE also creates inflation which means everyone has less spending power. They better hope that doesn't turn into a landslide of people giving their house keys back in response or no amount of QE is going to help.

[karkus30]

Originally Posted by tapzilla2k

Welcome to a Japanese style stagnation and a possible lost decade.
If we are in a liquidity trap then Keynesian economics does offer some options
in how to deal with it.

You can't really blame this on the World Economy, Osborne has made some serious errors of judgement and his arrogance procludes him from making a U Turn on his current Economic plan. Stick Ken Clarke back in #11 with Vince Cable as his #2.

Keynesian economics was developed by the bankers and corporations for the bankers and corporations, you can bet that if they thought that was the route out we would have already taken it. We have a massive public deficit and are on the cusp of being devalued by the ratings agency. More public spending would increase the interest rate the Government pays on loans, within months we would be sinking like the Spanish.

[tapzilla2k]

We are in this mess because we have a chancellor of the exchequer who removed Government support from the Economy and embarked on a deficit reduction plan based on slashing the structural deficit over one Parliament (Darling intended to slash it in half, Osborne has missed his target, it will more likely be 2017 or later) and attempted to jusitify that with wildly over optimistic growth figures. The Tories belief that slashing the size of the State thus creating space for the Private Sector to move in, has not happened due to the lack of demand and confidence in the Economy made worse by the coalitions Economic policy. That is the crux of Osborne's problems.
Without a combination of Growth, tax policy adjustments and spending cuts there is no way we can pay off the deficit proper let alone the structural deficit. We are not really in Austerity, if we were we'd be facing the sorts of cuts that Greece are being forced into by the IMF and co.

What we have to do now is invest money into infrastructure projects (The IMF has said the UK Government can delay some of the deficit reduction to pay for infrastructure projects) that add real Economic value. Take the railways, instead of building HS2 (it's a political vanity project) we could use that money to rebuild the entire rail network for the 21st century. We also need to sort out our aging Energy network and supply issues (instead Osborne has thrown bones to Tory Backbenchers and in the process mangled the Energy bill into a complete mess). The Government could also embark on a major house building project (new housing, refurbishing old ones etc) to deal with the housing crisis created by sucessive Governments from the 70's onwards.

If Osborne sticks to his plans and is not lucky enough to get some growth then we are heading towards the IMF with cap in hand for a bailout. That's if the IMF has any cash left once Greece and co implode.

As for the bond markets and ratings agencies ? If GDP continues to slide downwards then they will downgrade our credit rating from where it is now towards junk status.

[Cliff]

Originally Posted by MikeTV

It was a very serious point, Squiffy. The government only has one economic policy - which is subsidising the banks' lending activities. And they have been doing precisely that ever since the financial crisis started, in ever more massive amounts, at a cost to the taxpayer. It clearly isn't working. It's the exact opposite of what they should be doing. They are crippling the economy. The reality is nobody wants to use banks anymore. What is the cost to the economy of that? It's the worst economic disaster we have ever seen. And it is all the fault of the banks.

The economic crisis and the figures just released, deserve a more considered comment. Just scoring cheap political points and a chance to have a go at the banks is all too predictable . That is better left for the pub!

It was very evident that Balls and Brown had no ideas apart from spend spend spend and Osbourne is not turning things around yet either. So, let's not pretend there is a political party with a magic solution.

And as for Bank bashing ! Enough already!
Like it or not, the City banks are the UK's lifeline at the moment. If we continue to bash Barclay's, allow the US to fine and ruin the reputation of HSBC and allow Lloyds to go t*ts up then what? Let's just see how this country will cope when we don't have any large UK banks and regulation has forced other banks to migrate to New York, Europe or the Far East.

Tell me where the money will come from to support public expenditure then?

[karkus30]

Originally Posted by tapzilla2k

We are in this mess because we have a chancellor of the exchequer who removed Government support from the Economy and embarked on a deficit reduction plan based on slashing the structural deficit over one Parliament (Darling intended to slash it in half, Osborne has missed his target, it will more likely be 2017 or later) and attempted to jusitify that with wildly over optimistic growth figures. The Tories belief that slashing the size of the State thus creating space for the Private Sector to move in, has not happened due to the lack of demand and confidence in the Economy made worse by the coalitions Economic policy. That is the crux of Osborne's problems.
Without a combination of Growth, tax policy adjustments and spending cuts there is no way we can pay off the deficit proper let alone the structural deficit. We are not really in Austerity, if we were we'd be facing the sorts of cuts that Greece are being forced into by the IMF and co.

What we have to do now is invest money into infrastructure projects (The IMF has said the UK Government can delay some of the deficit reduction to pay for infrastructure projects) that add real Economic value. Take the railways, instead of building HS2 (it's a political vanity project) we could use that money to rebuild the entire rail network for the 21st century. We also need to sort out our aging Energy network and supply issues (instead Osborne has thrown bones to Tory Backbenchers and in the process mangled the Energy bill into a complete mess). The Government could also embark on a major house building project (new housing, refurbishing old ones etc) to deal with the housing crisis created by sucessive Governments from the 70's onwards.

If Osborne sticks to his plans and is not lucky enough to get some growth then we are heading towards the IMF with cap in hand for a bailout. That's if the IMF has any cash left once Greece and co implode.

As for the bond markets and ratings agencies ? If GDP continues to slide downwards then they will downgrade our credit rating from where it is now towards junk status.

I hear what you are saying, but there is no reason to entrust the Government with projects. All that will happen is that the generated money will go into the hands of whatever contractor is picked. The spending will create inflation which takes a long time to ripple through the economy and marginalises those on fixed pay. Whoever gets the money first derives the greatest benefit.

The housing crisis is none existent, the problem is that house prices are over inflated by cheap lending and the banks are scared to death that they will collapse as it means their bank balances will be wiped out. The other little understood problem is land ownership which inflates prices by restricting supply and therefore increasing profit. I like the idea of refurbishment, but why does that have to be a Government initiative, why not put money directly into the hands of the homeowner, many of who are living in sub standard accommodation. We have an old lady who has a very inefficient home and would like to move into a small, modern flat, but, the money she gets for her own home won't buy anything.

Improved rail networks would be OK but they should have been funded by reduced road subsidies and not by increasing the deficit. instead, successive Governments have ripped the heart out of public transport and given the cash to companies such as McAlpine ( another knight of the realm for services to his own pocket ) and Tarmac, now we have Carillion and of course Wimpey for housing. Do a search and see the connections and the massive contracts that were handed to them on a plate just like G4S.

None of the schemes you suggest actually add economic value they are just public labour schemes. The best people to create economic value are the current workforce in the private sector, improved exports, innovation and competition.

[Ed Selley]

Originally Posted by karkus30

None of the schemes you suggest actually add economic value they are just public labour schemes. The best people to create economic value are the current workforce in the private sector, improved exports, innovation and competition.

This.

Of course when many people are saying "investment by the Government" they don't even mean infrastructure, just a few more jobs in the public sector.

[sidicks]

Originally Posted by Ed Selley

This.

Of course when many people are saying "investment by the Government" they don't even mean infrastructure, just a few more jobs in the public sector.

Not just a few - hundreds of thousands - 'cos unemployment is bad as we have to pay benefits.....

[Rasczak]

Lord Oakeshott, a Lib Dem peer, has labelled George Osborne is a 'work experience' Chancellor and suggested he should be replaced by Vince Cable:

George Osborne is a 'work experience Chancellor' who should be moved in reshuffle, says senior Lib Dem - Telegraph

I do think that George Osborne has no business experience, he has never worked outside politics and he is doing surprisingly well for a chancellor on work experience.

Really, in a torrid time like this, we do need the absolutely best people available.

Personally I am not sure 'best person available' necessarily includes a man who is quite happy to flirt with girls young enough to be his daughter by means of revealling (and then almost frustrating) his anti-Murdoch strategy

[karkus30]

Originally Posted by Rasczak

Lord Oakeshott, a Lib Dem peer, has labelled George Osborne is a 'work experience' Chancellor and suggested he should be replaced by Vince Cable:

George Osborne is a 'work experience Chancellor' who should be moved in reshuffle, says senior Lib Dem - Telegraph

Personally I am not sure 'best person available' necessarily includes a man who is quite happy to flirt with girls young enough to be his daughter by means of revealling (and then almost frustrating) his anti-Murdoch strategy

Vince Cable fine, but the other two are basically criminal ex bankers, we definitely don't want any more banksters in positions of power.

[Mshulla]

Originally Posted by Cliff

And as for Bank bashing ! Enough already!
Like it or not, the City banks are the UK's lifeline at the moment. If we continue to bash Barclay's, allow the US to fine and ruin the reputation of HSBC and allow Lloyds to go t*ts up then what? Let's just see how this country will cope when we don't have any large UK banks and regulation has forced other banks to migrate to New York, Europe or the Far East.

Tell me where the money will come from to support public expenditure then?

Let's get it right, the banks have bought this on themselves.
Manipulating libor, alleged laundering drug money, these are the things that will damage them.
Negative comments about the banks on public forums are the least of their worries.

[tapzilla2k]

Originally Posted by karkus30

I hear what you are saying, but there is no reason to entrust the Government with projects. All that will happen is that the generated money will go into the hands of whatever contractor is picked. The spending will create inflation which takes a long time to ripple through the economy and marginalises those on fixed pay. Whoever gets the money first derives the greatest benefit.

That is true of any government contract in good times or bad times. The whole point is that by spending money on infrastucture projects you prop the Economy up to a point where confidence grows and spills over into the sector's you've mentioned. Government has to stimulate the Economy in as many ways as it can to restore confidence so that the private sector will start spending the cash it's sitting on for a rainy day.

The housing crisis is none existent, the problem is that house prices are over inflated by cheap lending and the banks are scared to death that they will collapse as it means their bank balances will be wiped out. The other little understood problem is land ownership which inflates prices by restricting supply and therefore increasing profit. I like the idea of refurbishment, but why does that have to be a Government initiative, why not put money directly into the hands of the homeowner, many of who are living in sub standard accommodation. We have an old lady who has a very inefficient home and would like to move into a small, modern flat, but, the money she gets for her own home won't buy anything.

Politicians will never give people money directly to stimulate the Economy through the purchase of houses or projects to improve housing or a lump sum to spend freely or save. It's a dirty idea to the political classes, they like taking tax money and spending it but woe betide the day, the taxpayer gets to decide how to spend it themselves.

There is a housing crisis - Social housing = Not enough properties to fill the demand most councils have (even without immigration there would still be a problem). House prices = Was part of the problem that lead to the Credit crunch. I can see another housing bubble once the economy picks up.

Tbh I think we need to get away from the idea that owning a house is the be all and end all of life and that it will gain value over time. That leads to a house price bubble which eventually bursts.

Improved rail networks would be OK but they should have been funded by reduced road subsidies and not by increasing the deficit. instead, successive Governments have ripped the heart out of public transport and given the cash to companies such as McAlpine ( another knight of the realm for services to his own pocket ) and Tarmac, now we have Carillion and of course Wimpey for housing. Do a search and see the connections and the massive contracts that were handed to them on a plate just like G4S.

I don't need to, I actually read a wide variety of sources about various subjects including government contracts. May is apparently a shareholder in G4S. We need an independent body to regulate government contracts across the board, as you can't trust the Politicians not to give favours to mates or those that flash the cash at the parties.

None of the schemes you suggest actually add economic value they are just public labour schemes. The best people to create economic value are the current workforce in the private sector, improved exports, innovation and competition.

It's about building confidence in the Economy with the hope that you stimulate the rest of the Economy into life (the sectors you've mentioned). Better to have young people employed on infrastructure projects than sitting on the dole increasing the benefit bill and making it harder for them to find a job whenever the Economy does pick up.

Having worked for private cleaning contractors, the balls up by G4S is not a surprise. Underbid, treat staff like dirt, fail to meet targets (fire staff to cut costs), still make a profit. The private sector can be just as bad as the Public Sector for delivering services in some ways.

We need a balance between the Public and Private Sector (and have done for many years). Osborne's rush to slash the size of the state was perhaps a case of jumping the gun before Growth had showed upto the track.

[domtheone]

Has there really been a slash of the state size? Still seems hideously massive to me. Perhaps if the state wasn't spending half of everything there might be some money to get this country out of the drink. Impossible now though, imo. Broken, forever.

[karkus30]

Problem is that we have Governments deciding who gets the contracts. G4S is a UK crown jewel, it's been handed contacts throughout the world. It doesn't take much to get an idea of how that works. This is the protectionism and favouritism that is mistakenly handed out to protect UK interests and the influential shareholders. Where is the competitive element ? In Newcastle they are using an alternative security provider, but where is this provider when it comes to Government contracts and police privatisation?

Without competition these big corporate companies just get at as inefficient as Public services, instead of good service they simply pay people less. With no competition the employees struggle to get higher wages and better working conditions. In the old days the strong unions would have ripped a big hole in companies like this, not necessarily for the good, but it would have created higher prices and eventually would destroy these big employers.

There is a myth about full employment and public contracts. Take rail upgrades. They would employ Carillion to do those upgrades, they are just another G4S, no competition and the shareholders and top management benefit, the public end up paying over the top.. Also, mostly they just take existing workers from other areas of the economy where wages are lower, but with similar skill sets. This means that the smaller private companies who were employing these people are disadvantaged. Public works that don't create ongoing and improving production are a bad idea. When the contract is over everything goes back to the way it was.

There is no evidence that public works creates confidence in the economy, all it would do is increase the deficit which would make everyone less confident.

Back on the subject of big corporate contract takers and protectionism for these companies, which includes banks, it's the lack of competition that has created these big blood suckers. They are like chicken coups, hiring and firing low grade staff depending on which way the wind blows. They are like huge weeds sucking the life out of a potentially diverse economy. It's this problem that I think is at the heart of the current state of the economy. It's why I firmly believe that we need to establish a free market without trade organisations and lobbying but with strong regulation of monopolies and corruption dealt with by impartial and binding law.

[damo_in_sale]

Originally Posted by tapzilla2k

Welcome to a Japanese style stagnation and a possible lost decade.
If we are in a liquidity trap then Keynesian economics does offer some options
in how to deal with it.

You can't really blame this on the World Economy, Osborne has made some serious errors of judgement and his arrogance procludes him from making a U Turn on his current Economic plan. Stick Ken Clarke back in #11 with Vince Cable as his #2.

I'm not sure that JM Keynes would agree with the remedies of many of today's Keynesians. In fact, he didn't agree with some 'Keynesians' when he was alive (there's a very famous quote of him regarding this matter).

The Japanese have had a 'lost decade' that has lasted twenty years. And that lost 'decade' will continue well into a third decade I expect.

Despite their fast trains and fancy gizmos, their future looks bleak.

They have tried almost every kind of government intervention during this period, including massive public spending in order to stimulate the economy. The result is a public sector net debt to GDP ratio of around 200% of GDP.

They have also tried large and unconventional monetary policy interventions, but these have been directed through their zombie banks, which government 'rescued'. The zombie banks don't lend the money, and the people don't want to borrow it, because both are indebted more than they would like.

The velocity of money, in my opinion, dropped off a cliff.

One policy that the Japanese didn't try is to do almost nothing, allow the debter with little hope of repaying to go broke and lenders the same.

In essence, they didn't allow markets to clear and to correct as they would naturally.

Would it have been better if they had?

In the British context, could government have used QE to, instead of purchasing UK Treasury Gilts on the open market, protect the deposits of ordinary people and business and let those banks go bust?

Maybe this would have ruined us all, given the global shock this would have resulted in?

Regarding our problems in the west, my opinion is that if the authorities had better managed the money supply (which they control) during the previous decade then we wouldn't have these enormous problems today. But they didn't.

Regardless, our economy now looks very much like that of Japan, and our future looks bleak.

PS, my preference for Chancellor would have been David Laws, but he soon stuffed that up.

[neilios]

A good article pinpointing the effect of the recession on the construction industry..
Regional Construction Forecast Data | The Construction Index
Typical renumeration has gone down again by as much as 18%,this is in addition to the cuts in pay since 2008...
Then we have the recent quarters which have seen another 10% drop in output...
Trouble is, the longer the slump goes on, the more the skills are eroded as site teams and professionals have to leave the industry for good.

But its just a symptom of ridiculous labour spending and monetary controls,the whole previous labour administration should stand down as MP's or they should be sacked...
Then the main culprits are those who have created the $1.2 quadrillion derivatives market which dwarves the world's annual gross domestic product which currently stands at $50 trillion and $60 trillion.
These people should simply be hanged..........

[karkus30]

Brilliant Damo and very well said, the comparison with Japan is very interesting. They have all the fancy infrastructure, strong manufacturing quarter, even great work ethic. In short they have everything we think we need.

So, what happened. With total clarity the problem is one of protectionism, they subsidise and protect their industries and run huge trade surpluses allowing them to lend to the Asian markets. This is exactly what Rothbard warned would happen, he predicted it almost 30 years ago and warned against American protectionist policy as an antidote for saving its own industries ( which went unneeded at the time as the US tried to stifle trade with its own subsidies, Quotas and tariffs ).

There is a belief that free market trading has failed, but it hasn't, we never had free market trading, we had the pretence of a free market with micro and macro versions of these subsidies, tariffs and quotas at an individual, company, national, continental and world level. It's the selfish gene in all of us that results in utter stagnation. The very thing that is supposed to give us individual survival, fails utterly, if we cannot recognise that together we are stronger. We have to transfer this selfishness further and further outward as we expand and grow, if we don't we will simply implode and collapse as a civilisation.

Forget economic theory, it's not really about that. We have to see that we are all one race of people with a common purpose. Should we colonise alien worlds we have to expand that cloak again. The selfish gene won't save us, if we simply apply it as individuals, families, races, religions,nationalists or globally. We should have learned, it's bloody obvious, we only have two possibilities, one is war and one is stagnation. We had war, we saw it didn't work, so we swapped one failure for a peaceful stagnation. The whole world is a vibrant, ever changing place, it cannot be controlled, we can only work together to survive. We must learn or we will simply go into decline permanently.

[johntheexpat]

Originally Posted by Cliff

. If we ...., allow the US to fine and ruin the reputation of HSBC

You are kidding, right? The way you have put that seems to imply that the US should not be allowed to punish law-breakers because you don't like it.
If the US case is proven (which the fine implies) then it is HSBC that has tarnished its own reputation.

Or are you hankering after the total de-regulation of banking across the globe because when left to its own devices its so profitable and thus good for the economy?

[Squiffy]

Originally Posted by johntheexpat

Or are you hankering after the total de-regulation of banking across the globe because when left to its own devices its so profitable and thus good for the economy?

I don't want to presume to speak for anyone else, but I think the point was being made that the US regulators are promoting their own banking sector by being lenient with domestic banks, but overly harsh with foreign banks.

[johntheexpat]

Originally Posted by Squiffy

I don't want to presume to speak for anyone else, but I think the point was being made that the US regulators are promoting their own banking sector by being lenient with domestic banks, but overly harsh with foreign banks.

Well naughty old US of A. I assume you can show that to be the case? Or provide a link that supports the view?

Perhaps its more the case that the US can and do stand up to the dirty dealings of the banks, unlike most other western countries?

[sidicks]

Originally Posted by Squiffy

I don't want to presume to speak for anyone else, but I think the point was being made that the US regulators are promoting their own banking sector by being lenient with domestic banks, but overly harsh with foreign banks.

That is exactly the point, but once again you are under the impression that people on here want to have a rational and balanced discussion about anything to do with the 'banks'.

[johntheexpat]

Originally Posted by sidicks

That is exactly the point, but once again you are under the impression that people on here want to have a rational and balanced discussion about anything to do with the 'banks'.

Fine, you provide some supporting evidence that the US is skewed towards favouring its own banks over foreign ones, with harsher judgements for overseas businesses.

[Mshulla]

Originally Posted by Squiffy

I don't want to presume to speak for anyone else, but I think the point was being made that the US regulators are promoting their own banking sector by being lenient with domestic banks, but overly harsh with foreign banks.

Doesn't change the fact the banks are they're own worse enemy.
The banks actions are ruining the reputation of the City and the US is going to take advantage of that.