Bolitics The New Condem Government

[LondonLax]

Well if they put it back into a bank the bank can use its lending potential multiple times over but whilst its outside the bank that money and all its lending potential are dead to the banking system.

I'm not quite sure what point you are arguing.

You admonished Peter for suggesting that FRB creates money and yet you've rather explained it in that way above, haven't you?

No, it isn't actually creating anything, just moving the money around, lending against future earnings.

The only organisation that can actually 'create' money is the reserve bank of a country.

No, it's not just moving money around. Future earnings don't actually exist, do they? They are hoped to exist at some point in the future, but they don't exist. They are not what is loaned, they are simply the security for what is loaned.

What is loaned is newly created credit, created out of, literally, nothing; ie an addition to the money supply.

Curiously the monetarists would foam at the mouth at the very idea of governments creating money, but the banking system didn't seem to arouse the same degree of wailing and gnashing of teeth.

Those future earnings do exist. They are held by other people/banks/organisations etc on their balance sheets.

The total money supply is limited to what the reserve bank says it is. They are the only ones who control the total supply of curreny in any country.

[blandy]

Governments are not like households. It is extremely concerning that Obama seems not to realise this

I think we know that Obama, Osbourne, Cable, and the rest of them know that a Gov't and a household are not the same thing.

Have you read Obama's speech? He specifically compares government debt with a credit card; he creates a false analogy based on an utterly false premise. Either he doesn't realise this is false, or else he is deliberately misleading people. I find both possibilities unacceptable, as it happens...

I totally disagree. I think the inference you are taking from what he said is different to what I take from it, and what others will take from it. I think he is (as I said in my previous post) trying to get across to the population in general that "some debt is manageable, indeed essential, but extreme levels of debt are not" - in some ways he's making, to an extent, the same point as you are - that he believes and knows that debt is necessary and in itself is not bad (and people know this as they themselves use debt in their lives) . He is saying that the Republicans [scared into the position they are in by the tea potties] are saying no - make deep cuts now to (savagely) reduce the level of debt and he's saying "that's not the way to go."

[snowychap]

The total money supply is limited to what the reserve bank says it is. They are the only ones who control the total supply of curreny in any country.

Again, what do you mean when you use the term 'money'?

It sounds like you only mean notes and coins.

[LondonLax]

The total money supply is limited to what the reserve bank says it is. They are the only ones who control the total supply of curreny in any country.

Again, what do you mean when you use the term 'money'?

It sounds like you only mean notes and coins.

No not just physical money. When the bank of England undertakes quantitive easing to increase the money supply it doesn't actually print extra notes.

Anyway, if banks can create their own supply of money what is to stop a greek bank extending a line of credit to the greek government to the tune of some 200billion euros with a low interest rate thus solving the Greek debt crisis?

[snowychap]

No not just physical money. When the bank of England undertakes quantitive easing to increase the money supply it doesn't actually print extra notes.

Indeed it doesn't but you keep on referring to currency when speaking about money.

Isn't a problem with QE that it only directly affects a narrow part of the broader money supply and beyond that (where its impact is needed is the policy is to work as intended) its effects upon the money supply are down to factors outside of the central bank's control?

I'm not sure where credit, for exmple, fits in to your idea of money. Are you suggesting that it isn't part of the money supply?

Anyway, if banks can create their own supply of money what is to stop a greek bank extending a line of credit to the greek government to the tune of some 200billion euros with a low interest rate thus solving the Greek debt crisis?

In principle, I don't know that there would be anything. In practice, credibility (of the loan/credit)?

It wouldn't solve their debt crisis, either, would it?

[LondonLax]

No not just physical money. When the bank of England undertakes quantitive easing to increase the money supply it doesn't actually print extra notes.

Indeed it doesn't but you keep on referring to currency when speaking about money.

Isn't a problem with QE that it only directly affects a narrow part of the broader money supply and beyond that (where its impact is needed is the policy is to work as intended) its effects upon the money supply are down to factors outside of the central bank's control?

I'm not sure where credit, for exmple, fits in to your idea of money. Are you suggesting that it isn't part of the money supply?

No credit is part of the equation and it is matched by a debt somewhere else in the system.

This is true for all normal banks but differs from the central bank which can issue credit into the money supply without any debt being created to take it back out again.

Anyway, if banks can create their own supply of money what is to stop a greek bank extending a line of credit to the greek government to the tune of some 200billion euros with a low interest rate thus solving the Greek debt crisis?

In principle, I don't know that there would be anything. In practice, credibility (of the loan/credit)?

It wouldn't solve their debt crisis, either, would it?

Well it would solve their immediate crisis. Currently no one is willing to lend them money at a rate they can afford to pay back. If banks could create money with no obligations like a reserve bank does than the Greek governments immediate problem would be solved with a massive loan at low interest from a private bank.

[snowychap]

No credit is part of the equation and it is matched by a debt somewhere else in the system.

Again, I don't really understand what point you are arguing.

Just because it may be matched by a debit somewhere else doesn't mean that it hasn't been created.

Currently no one is willing to lend them money at a rate they can afford to pay back. If banks could create money with no obligations like a reserve bank does than the Greek governments immediate problem would be solved with a massive loan at low interest from a private bank.

I'm not sure how you can use the unwillingness of organizations to do something as an argument that they are unable to do it.

[Awol]

He is saying that the Republicans [scared into the position they are in by the tea potties] are saying no - make deep cuts now to (savagely) reduce the level of debt and he's saying "that's not the way to go."

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

[Gringo]

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

Politicians don't have to accept it - they don't face a permanent reduction in living standards.

[colhint]

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

Politicians don't have to accept it - they don't face a permanent reduction in living standards.

this every time

[blandy]

He is saying that the Republicans [scared into the position they are in by the tea potties] are saying no - make deep cuts now to (savagely) reduce the level of debt and he's saying "that's not the way to go."

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

Put like that, yes, it is at consumer level.

It started from Reagan and Thatcher's loosening of banking regulations - the population moved, led by eager bankers, towards a model of borrowing to pay for things, rather than saving to pay for things. We moved from mortgages being hard to get, and restricted to 3x earnings to no deposit, 7x earnings. Credit was advanced to people at higher levels of risk of non-repayment than previously.

The attitude that house priices rising was a good thing - that houses were an investment, rather than a home. That loans could be secured against future rises in house prices. The model was always absolutely certain to break.

I think at Gov't level it's a different story.

[Awol]

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

Politicians don't have to accept it - they don't face a permanent reduction in living standards.

To the point, as ever.

What I meant to say was that they haven't manned up enough to tell voters the harsh reality of the situation, which is that the current social democratic models for western societies are simply unaffordable in their current form.

I certainly didn't mean that politicians woud suffer - unless they are physically thrown out of office (preferably via 2nd floor windows) by the people.

[drat01]

Some Tory supporters claim (wrongly) that their party is not one without a social conscience, but then we see one of their leading lights come out with bile such as this and proves that they are ideologically led and want to oppress certain parts of society.

This is Letwin who claimed a few thousand in expenses to fix his tennis court by the way

link

Public sector workers need 'discipline and fear', says Oliver Letwin

Coalition's policy chief on reforms believes excellence would be achieved through fear of losing jobs and real discipline

Oliver Letwin, the coalition's policy minister, has revealed the government's determination to instil "fear" among those working in the public sector, who he claimed had failed for the past 20 years to improve their productivity.

Letwin, architect of the coalition's plans to reform public services, told a meeting at the offices of a leading consultancy firm that the public sector had atrophied over the past two decades.

In controversial comments angering teachers, nurses and doctors, he warned that it was only through "some real discipline and some fear" of job losses that excellence would be achieved in the public sector.

Letwin added that some of those running schools and hospitals would not survive the process and that it was an "inevitable and intended" consequence of government policy.

"You can't have room for innovation and the pressure for excellence without having some real discipline and some fear on the part of the providers that things may go wrong if they don't live up to the aims that society as a whole is demanding of them," he said.

"If you have diversity of provision and personal choice and power, some providers will be better and some worse. Inevitably, some will not, whether it's because they can't attract the patient or the pupil, for example, or because they can't get results and hence can't get paid. Some will not survive. It is an inevitable and intended consequence of what we are talking about."

Mark Serwotka, general secretary of the Public and Commercial Services Union (PCSU), reacted angrily to Letwin's comments, describing them as "nonsense".

He added: "Public sector workers are already working in fear – fear of cuts to their job, pension, living standards and of privatisation. Far from improving productivity, the cuts are creating chaos in vital public services."

Letwin was speaking at the launch of a liberal thinktank's report at the London headquarters of KPMG, one of the biggest recipients of government cash, which won the first contract for NHS commissioning following the decision to scrap primary care trusts and further open the health service to private companies.

Letwin's recent white paper on public sector reform had been dismissed as watered down earlier this month amid speculation that the Liberal Democrats had vetoed radical change. But Letwin said on Wednesday that he believed he was prosecuting "the most ambitious set of public service reforms that any government in modern Britain has undertaken", adding that productivity had improved across the economy except in the public sector in the past 20 years.

A spokesman for the Office for National Statistics (ONS) said he did not know where Letwin had sourced his figures. However, an ONS analysis that works back to 1997, shows that productivity in public services fell on average by 0.3% a year between 1997 and 2008 because the level of inputs, such as staff and equipment, increased faster than the output, such as operations performed and numbers of pupils taught.

Harriet Harman, Labour's deputy leader, said last night that she did not recognise Letwin's portrayal of the public sector. "Death rates in hospitals have been falling, satisfaction levels have been rising," she said. "What hasn't changed is the Tories' antipathy to public services. And the idea that the way to improve public services is to put fear into those who provide them is absolutely grotesque."

A Cabinet Office spokesperson said: "It is widely acknowledged that there is a problem with productivity in public services. The government's policy is to improve it and provide the best value for the taxpayer."

What a complete and utter a-hole

[blandy]

He's an utter tube.

The other thing is that "fear" of losing your job does not equate to "more efficiency" if anything it is more often the exact opposite. You become demoralised, you lose pride in your place of work, you are less inclined to go "that bit further" because you may think "we're doomed anyway, why bother".

maybe there is a need to improve productivity, I don't know. it's always what "they" want. On the other hand, if you increase productivity you may end up with less people doing the same amount of work, rather than more work being done by the same number of people - then you have to pay redundancy, you have the fewer people working harder suffering from more illness and stress. Everybody loses.

[peterms]

Governments are not like households. It is extremely concerning that Obama seems not to realise this

I think we know that Obama, Osbourne, Cable, and the rest of them know that a Gov't and a household are not the same thing.

Have you read Obama's speech? He specifically compares government debt with a credit card; he creates a false analogy based on an utterly false premise. Either he doesn't realise this is false, or else he is deliberately misleading people. I find both possibilities unacceptable, as it happens...

I totally disagree. I think the inference you are taking from what he said is different to what I take from it, and what others will take from it. I think he is (as I said in my previous post) trying to get across to the population in general that "some debt is manageable, indeed essential, but extreme levels of debt are not" - in some ways he's making, to an extent, the same point as you are - that he believes and knows that debt is necessary and in itself is not bad (and people know this as they themselves use debt in their lives) . He is saying that the Republicans [scared into the position they are in by the tea potties] are saying no - make deep cuts now to (savagely) reduce the level of debt and he's saying "that's not the way to go."

You are too kind to Mr Obama.

He's not stretching an analogy to make a point, he is breaking the connection between what he describes and the thing he is describing, in order to deceive.

This whole debt debate is a false crisis, deliberately engendered to panic people into quietly accepting things they should not accept.

The idea that the US will run out of money and be unable to pay its "debts" is frankly laughable. The debt ceiling is a wholly political construction. It has no meaning in economic terms. The debt itself is a strange notion - the country issues safe bonds at high interest rates to financiers to offer them a better alternative to putting money into companies which might thrive or might collapse. But the US, like other countries, issues these bonds, accepts this "debt" not because it is actually borrowing real resources from people who actually have them, and without which it couldn't do what it wishes, but rather as a money-making scheme for people who wish to invest in safe things and receive a trouble-free return.

Insofar as national "debt" is largely owned by domestic savers (and some of it is), it's maybe not a harmful game to play. When it gets to the state of cutting real facilities for real people in order to pay rentier profits to thieving taxdodgers for basically nothing, it's objectionable and wrong. And that's where we are now.

The whole debt ceiling sham is a piece of petty, transparent theatre cooked up between the two virtually identical parties to panic the masses into accepting the shite that will come their way. Oh god, the world is about to end! Only thirty minutes to save the world! Oh my god, they've pulled it off! They've reached a last minute compromise! Well, we'd better accept all the cuts they all agree are necessary, then...while failing to tax the rich, cutting programmes for the poor, and shifting a lot of resources away from the poor and towards the rich.

Obama is culpable in this process. He should know better, and he was elected to do different. He has let people down in a way that cannot be forgiven.

[Gringo]

Yep it's all a stage managed crisis detracting people away from real issues. It is important in that it marks a change in the way the US conservative parties manage their images with respect to the people who keep them in power. It's a bit of a game, but no one in the financial sector is seriously worried about the outcome.

[tonyh29]

oppress

well that's a new one from Labour HQ , of course smoke bans, anti-terror laws and ID cards weren't 't oppressive in any way shape or form were they ...

no new buzz words from me , I think our friend the "h" word still fits the bill perfectly

[drat01]

As usual Tony your defence of this is to deflect to Labour. |For just once could you actually talk about the Tory party rather than deflecting and try and defend why they are taking these actions - mostly against certain groups and parts of society.

[Awol]

He is saying that the Republicans [scared into the position they are in by the tea potties] are saying no - make deep cuts now to (savagely) reduce the level of debt and he's saying "that's not the way to go."

Isn't part of the problem that the West in general has lived beyond its means for many years and neither people or politicians have yet accepted that we may face a permanent reduction in living standards?

Put like that, yes, it is at consumer level.

It started from Reagan and Thatcher's loosening of banking regulations - the population moved, led by eager bankers, towards a model of borrowing to pay for things, rather than saving to pay for things. We moved from mortgages being hard to get, and restricted to 3x earnings to no deposit, 7x earnings. Credit was advanced to people at higher levels of risk of non-repayment than previously.

The attitude that house priices rising was a good thing - that houses were an investment, rather than a home. That loans could be secured against future rises in house prices. The model was always absolutely certain to break.

Absolutely. Governments, businesses and individuals have borrowed against future growth and never asked 'what happens if it doesn't appear?' We've been living very cosy lifestyles which are now seen as a birthright in the West financed by the futures of people still unborn, but the level of debt (100's of trillions globally, I think..) is so vast compared with global GDP (about 60-70 trillion) I can't see how it will ever be paid back without 'austerity' on an apocalyptic scale.

Someone, somewhere, needs to be thinking about how to peacefully deconstruct and reconstruct the existing system (and the institutions that encouraged it) before it simply collapses. The alternative is pretty grim imo.

[tonyh29]

For just once could you actually talk about the Tory party rather than

if you could post without words like "ideologically " "certain Tory posters" in every post then I'm sure we could

but your not interested in that nor my answers so the pantomime may just as well continue

Now after 3 ...Oh no he didn't