Bolitics The New Condem Government

[mockingbird_franklin]

They think assessment is good for us maybe we need the tables turned

 

http://s17.postimg.org/47e0xwee7/1148811_10151522948677484_1031729565_n.jpg

[bickster]

Interesting, anymore info on that?

[peterms]

Wren-Lewis on the "recovery".

 

The wrong sort of recovery

 

First, I want to admit to a failure of imagination. Although I described this post as perhaps one of my better forecasts, I did get one important detail wrong. I said (in May 2012) that if there was a risk that UK growth would not come good by 2015, the Chancellor would apply additional stimulus measures, and I suggested investment incentives for firms as an example. That was a dumb example. I suggested it because I thought it made macroeconomic sense. Yet it was dumb because I also knew by then that this was not the way George Osborne thinks. I should instead have asked myself what stimulus measure would provide the best political advantage. And the obvious answer is to make it easier for people to buy houses, because this pushes up house prices. Now, as an economist, you might think rising house prices is the last thing we need, with UK house price to earnings ratios still very high (see below). But from a political point of view, if you are trying to get homeowners’ votes, it makes a lot of sense to engineer a short term increase in house prices, particularly if you make it immediately easier for those who want to buy to get ‘onto the ladder’.

 

So that is what the Chancellor did, with his ‘Help to Buy’ scheme, which either provides guarantees for a significant proportion of 95% mortgages, or provided top-up loans for up to 20% of the house price. Frances Coppola is shocked. She writes

 

“As my regular readers know, I am determinedly politically non-aligned, so what I am going to say now will probably shock a lot of people. Osborne's behaviour both angers and frightens me. He is playing brinkmanship with the UK economy to achieve political ends. Nothing he does makes much sense from an economic point of view - which is why the flagship Help to Buy scheme has been universally panned, even by his own department and by people from his own party. But if you view his actions as entirely determined by his desire to secure a Conservative victory in 2015, it all makes perfect sense. He is dangerous.”

 

As my regular readers will know, I’m afraid I very much agree. In my ‘final verdict’ on the Chancellor, I wrote “He is a political tactician, who time and again has put party political gain ahead of the economic interests of the economy.” (That should have been ‘of the country’, but you know what I meant.)

 

However, as I always like to try to think well of this government’s macroeconomic policy, let me put the argument that getting a recovery by making it easier to borrow money to buy houses makes some sense. It goes something like this. An important reason why the recovery so far has been anaemic is that UK banks are broken. So they are being far too cautious in lending for house purchase. In particular, they are worried that house prices could well fall, and they do not want to pick up the tab if this happens. If you think that is a distortion (because you think they are being too risk averse), then Help to Buy just corrects that distortion. In addition, there are good reasons why one of the byproducts of this scheme might be a boost to aggregate demand.

 

What is wrong with this argument? While the idea that UK banks are being excessively risk averse in their lending to small businesses is quite plausible, the argument applied to housing is not. The chart below is Nationwide’s first time buyer house price to mean gross earnings ratio.

 

 

 

It has fallen as a result of the recession, but remains historically very high. There are two obvious reasons why it is so high: an inability over the last decade or two to increase housing supply in line with demand, and the fact that interest rates are currently very low. It is a clear objective of government policy to remove barriers to increasing supply, and at some point in the not too distant future interest rates are likely to rise. There is therefore a significant chance that in the medium term real house prices will fall. So it is quite reasonable that banks want to transfer that risk on to someone else.

 

Now you could say why shouldn’t that someone else be the government? What does it matter if at some point in the future taxes are raised or spending cut to pay for the losses the government will incur on these schemes. If it gets us a recovery, that is a cost worth paying. And that is half right. After all, fiscal stimulus involves spending now, but paying for that with higher taxes or lower spending later. Yet this comparison shows how wrong this scheme is. If we borrow now to increase public investment, then when taxes are higher in the future to pay back that borrowing we have something to show for it. If taxes go up in the future to cover the defaults on loans made to house buyers, we have nothing.

 

So I think Frances is exactly right. The Chancellor is a very skilled political operator, and with schemes like this the UK is in danger of enjoying another five years of bad economic decisions designed to gain party political advantage.

 

[snowychap]

Not just to stop the thread dropping on to page 2 but some utter **** on Newsnight has just made this claim:

The forecast is for gas bills to increase between now and 2020 by 21% - fracking is going to make that increase 11% thus 'halving the bill'.

 

What the **** **** ?

[peterms]

Not just to stop the thread dropping on to page 2 but some utter **** on Newsnight has just made this claim:

The forecast is for gas bills to increase between now and 2020 by 21% - fracking is going to make that increase 11% thus 'halving the bill'.

 

What the **** ****?

 

Utter, toe-chewing nonsense.  The claim depends on so many imponderables and political decisions about subsidy as to be imaginary.

 

Like, "Nuclear is cheap.  No, we don't account for the cost of dealing with waste, because future generations will have such advanced technology that this won't be a problem".

[snowychap]

It's not just the imponderables as to whether it will be a 11% or 21% increase but that, even if the imponderables held, it would halve the increase and not halve the bill. Why does a news programme of repute allow its contributors to get away with such stuff?

 

Edit: Unless the subtext is to get the public to take the present price as a given (i.e. the base point). That's rather sinister.

Edited August 16, 2013 by snowychap

[peterms]

It's not just the imponderables as to whether it will be a 11% or 21% increase but that, even if the imponderables held, it would halve the increase and not halve the bill. Why does a news programme of repute allow its contributors to get away with such stuff?

I suspect it's pressure of time.  They have a tight schedule, which doesn't allow much predigestion.  Even working round the guests in the studio for quotes seems rushed, and they cut people off - not as bad as the shameful Today programme, nut getting there - and so there is no room for clam, reflective views, even though that is what we most lack.

[snowychap]

I suspect it's pressure of time.

You are much more forgiving than me, Peter.

[chrisp65]

same thing truly winds me up

 

Radio news a week or two ago 'they' allowed a tory apologist to announce that inflation and cost of living was still higher than pay rises but not widening by as much as last year - so things are getting better.

 

NO

 

they are still getting worse you liar and/or thicko

[peterms]

For those who don't think Twitter is up to much, an NZ tweeter has summed up privatisation in less than 140 characters:

 

Helen Kelly @helenkellyCTU

Govt will sell our power company by loaning our tax as interest free loans 2 rich people, & we will pay them dividends from ovr priced power

 

[blandy]

So, they use terrorism laws to harass journalists.

They encourage Fracking and discourage renewables.

They arrest people who peacefully protest.

They kettle students and pensioners

They cut taxes for the rich and decrease benefits for the poor.

They appoint scientific advisors to look at things like Drugs & Bovine TB and then do the opposite of the advice from the experts.

They appoint private companies to assess the incapacitated for disability allowance

They penalise people in houses where there is nowhere for them to move to.

They address the deficit by cutting spending on infrastructure.

They get vans driving round to say "go home" immigrants

 

They're the most deceptive, loathsome, dishonest, incompetent, lying, self serving, odious Government we've ever had. And that takes some doing.

[Jon]

Yes, he's back, back again, tell a friend.

 

Excellent post there Pete. The scary thing is that it seems like the zombified mass of people, content in watching X factor, BGT and soaps, are happy with their matrix like existence. Or at least, not unhappy enough to have their wherewithall to do anything. 

 

Various sections of society have been targeted, and various sections have stood up and resisted/protested. But not all at once.

 

Divide and conquer. Divide and rule.

 

Is there a sector that they haven't pursued? Other than 'their own'.

Edited August 21, 2013 by blandy

[Eames]

Yes, he's back, back again, tell a friend.

 

Excellent post there Pete. The scary thing is that it seems like the zombified mass of people, content in watching X factor, BGT and soaps, are happy with their matrix like existence. Or at least, not unhappy enough to have their wherewithall to do anything. 

 

Various sections of society have been targeted, and various sections have stood up and resisted/protested. But not all at once.

 

Divide and conquer. Divide and rule.

 

Is there a sector that they haven't pursued? Other than 'their own'.

I'm just curious..... who would you define as "their own"

[blandy]

The scary thing is that it seems like the zombified mass of people, content in watching X factor, BGT and soaps, are happy with their matrix like existence. Or at least, not unhappy enough to have their wherewithall to do anything. 

 

Various sections of society have been targeted, and various sections have stood up and resisted/protested. But not all at once.

That's a really good observation - not one I'd thought of. You're right, they're getting away with it due to apathy, cynicism and the fragmented nature of the opposition. And I suppose because all the other parties are either so small, so like minded (UKIP) or so feeble (Labour, sadly). I mean when the country really needs a strong opposition, there's just nothingness from Labour - no coherently expressed message that what's going on is so utterly wrong and so utterly lamentable.

 

The remnants of the press are either bonkers (Daily Mail), Celebrity obsessed (tabloids), struggling with finances due to the interwebs (Indie) or doing bits to jump on the evidence that emerges (Grauniad), but there ought to be a wave of opposition, surely. I mean I know there's folk who agree with bits of stuff - on immigration, or on benefits, but the overall picture is that I can think of no-one outside the Tory party who is anything other than teeth grindingly unhappy and frustrated with the state of the nation.

 

But there's no move for a different tack at all. 

[bickster]

I just hope there is a spark that ignites the general apathy sometime soon, though I'm not holding my breath

[Jon]

 

Yes, he's back, back again, tell a friend.

 

Excellent post there Pete. The scary thing is that it seems like the zombified mass of people, content in watching X factor, BGT and soaps, are happy with their matrix like existence. Or at least, not unhappy enough to have their wherewithall to do anything. 

 

Various sections of society have been targeted, and various sections have stood up and resisted/protested. But not all at once.

 

Divide and conquer. Divide and rule.

 

Is there a sector that they haven't pursued? Other than 'their own'.

I'm just curious..... who would you define as "their own"

 

In order to be as concise as possible, for reasons of brevity, I'd simply go with 'the wealthy/uber wealthy'. In days of yore, many of those 'running' the Tory guvmint (i don't think that we can really call it a genuine coalition, can we?) today would be described as the landed gentry. In fact, that description probably does still hold true. 

[Jon]

 

 

They're the most deceptive, loathsome, dishonest, incompetent, lying, self serving, odious Government we've ever had. And that takes some doing.

The startling thing is, the is 'supposed' to be a coalition government .... and yet it arguably has wreaked more/as much destruction than the enormously large majority thatch governments of the 80s

[peterms]

In order to be as concise as possible, for reasons of brevity, I'd simply go with 'the wealthy/uber wealthy'. In days of yore, many of those 'running' the Tory guvmint (i don't think that we can really call it a genuine coalition, can we?) today would be described as the landed gentry. In fact, that description probably does still hold true.

There's one important development since those "days of yore", which is too often unremarked.  We are dealing less and less with a national landed elite, and more and more with a global elite, whose wealth transcends borders more than ever before, and whose interests are little aligned to those of any particular country.

 

So for example this week we again see the Greek economy talked about as "the Germans" bailing out "the Greeks", when in fact it's the Germans and the Greeks bailing out the wealthiest people in the world; in Egypt, we read about divisions between religious and secular groups, when what's happening is that the ruling elite are reasserting their control of the state, aided and supported by Saudi, by Israel, and by the US.

 

And so on.

 

This is why the discourse about "the national interest" as spouted by the likes of Cameron is utterly, shockingly dishonest.  Their loyalty is to a supranational class, which is why they care so little about so many of the people of this country.  The word for it used to be "treason".  Still a capital offence, isn't it?

[ender4]

Not just to stop the thread dropping on to page 2 but some utter **** on Newsnight has just made this claim:

The forecast is for gas bills to increase between now and 2020 by 21% - fracking is going to make that increase 11% thus 'halving the bill'.

 

What the **** **** ?

 

 

total stupidity... and a mix-up of 2 different facts.

 

I believe in the USA, fracking actually has 'halved the bill'.

Thats due to the nature of the USA market for gas, and the disproportionate impact of fracking on the market.

 

Whilst in the UK, fracking doesn't have much of an impact as its a European gas market, so prices are more sensitive to other factors.

Therefore prices won't rise as much as they would have.

 

the '**** ' on Newsnight has probably mixed up the 2 'facts' of the USA market & UK market.

[peterms]

I understand there's also very different geology involved, so the US savings can't simply read across to what would happen here - quite apart from the environmental impact.