³ÉÈËÂÛ̳

Economic theory of individuals making decisions based on self-interest. Who, in their right mind, would want to work with Congress and the lobbyist that undermine any proposals in the public interest. Probably tired of having to shower so frequently to get the grim of sleaze of D.C. off.
A tenured gig at Harvard...who would give that up? Pontificating on economics...lucrative speaking engagements to the financial services industry...warping young minds in the practices of voodoo chart making.

Tell me, how does it come about that I get the message:
"You already said that in a provious comment"
when it is totally apparent to me that the posting is to a new blog and the topic is original.
And when I try to post this message it says:
"You already said that in a provious comment"
......
....
..
.

CARPING..on the sidelines, is not confined to American politics .If Congress and the White House cannot agree then the President should call a snap election.The same applies to government in our country. After all, both
countries are Democratic societies ...( are we not?)

Apparently Herbert Allison an important figure in the US treasury has announced his resignation today. This is reported on Radio BFM's web site ( the French specialist business and economics radio station ) . It does n't seem to be on the ³ÉÈËÂÛ̳ site yet. It may be somewhere.

What does it mean that there are no more Summers for Obama?
For one thing, it means that Obama is more "attached" to Ben Bernanke as Head of the Federal Reserve. I guess we all knew that when the President nominated Mr Bernanke for a second term, he was simultaneously making the decision that he preferred Bernanke's finances to Summers' finances.
It's also possible that Larry Summers heard the train coming through the economic tunnel; he knew that it was either get out NOW, or face the realization that once the train explodes from the tunnel, one can neither jump right or left:
RIGHT - securing the recovery, and
LEFT - tackling the deficit.
The American stimulus package, most economists (even reluctantly) will admit failed to stimulate, failed to job create, failed to ease credit...All it did was bail out financial institutions too big to fail.
Ben Bernanke and the USA future:
Ben Bernanke will buy up billions in long term US Treasury securities. Ben Bernanke will increase the level of purchases of Fannie Mae and Freddie Mac mortgage-backed securities, probably as high as $1 trillion. Ben Bernanke will double the purchases of Fannie Mae, Freddie Mac, and Federal Home Loan Bank bonds.
What does this mean?
Buying its own long term treasury securities will devalue the American dollar. The only way to get the money to purchase these securities is to run the printing presses. The end result: hyper-inflation, likely within the first year.
In addition, the United States of America will corrode its relationship with our its foreign creditors because the United States has become a debtor nation. The United States must rely on borrowing from foreign countries such as China and Japan, in order to cover its multi-trillion deficits.
Borrowing money to cover its deficits is one thing, but printing progressively worthless money to cover its deficits is another. Because of the decline in the value of the dollar, the United States will be paying foreign creditors in dollars that are worth-less. Do you think foreign creditors will put up with this for long?
The Fed’s announcements shows the path of America's future: hyper-inflation in what will be a futile attempt to stabilize the economy
Indeed, the refusal to raise taxes, especially on the wealthy demonstrates that America is in some sort of denial: the United States is not making sacrifices, not cutting spending, not laying the foundation for economic recovery. By living in denial, the United States is taking the low road to hyperinflation.
Ben Bernanke will accomplish a reduction in mortgage rates which will lead to mortgage refinancing, but this won't stop the decline in housing prices. This does nothing to work off the massive inventory of unsold houses. In fact, prospective buyers will have little reason to buy a house when all they can see is falling prices. Home purchases are also being depressed by the growing unemployment and the number of employees concerned about losing their jobs.
Hyper-inflation will impact the personal expenses of every American. Rising expenses will reduce the amount of money that can be saved or spent. The most detrimental effect will be on those who have retired or who are living on a fixed income.
Those approaching retirement may decide they need more income, but where will they get the second job?
My bottom line: The Central Bank has got to go. The Reserve Banking system has reached unsustainability. To continue to let Bankers dictate monetary policy will only lead to destruction of the American future.

Hi Stephanie
Your articles these days seem as concerned with politics as they are with economics.Many might think that the statement by the Federal Reserve last night was of more significance in economic terms than Mr.Summers departure.According to notayesmanseconomics blog the statement has these implications.
"It is interesting that the FOMC is overtly talking about inflation and implying that it will act to move it higher. At the moment it will look to achieve its current target which implies expansion as inflation is below target, but there is perhaps also a slight hint that if this does not do the job then the FOMC may act in the fashion suggested by some commentators and the IMF of aiming for a raised inflation target"

If you look at the way that the bond market including the inflation linked section,gold and the US dollar responded it is hard to avoid the view that something significant was announced.

#6 Francesca Jones
I agree with notayesmaneconomics that for Bernanke to raise the inflation target beyond 2%, he would have to "spin on a pin" given what he said in his speech in Jackson Hole.

US economic policy is still enthral to Harvard...

Harvard trained economists Ben and Mervyn got it disastrously wrong in the noughties and turned a blind eye the the causes of the economic collapse.

The US desperately needs to flush out the poor quality debt in the housing mortgage market. Japan did not do this and this led to a policy cleft stick that gave it the lost decade. The US is in just as poor a position as the UK in this respect (as still is Japan by the way. What has happened to the 100 year mortgages that the banks were allowed to write by the way!)

Economic history of bubble collapses demonstrates that until the debt is properly deflated the real economy can't grow again. (see the 1870 and 1930 bubbles and the role of debt deflation in kick starting a recovery.) The fact is that banks are full of poor quality debt and because of this they, and we, are trapped. The only way out if the defy the trap and stick up interest rates on both sides of the pond. Money is presently worthless and what is more the rate differential in the market is completely out of the control of the central banks - itself a disastrous situation and a demonstration of complete lack of regulatory power or understanding.

Both Ben and Mervyn must go! Let us hope that Larry Summers departure is one of many and the twits who regulated the World so badly that they connived at the creation of the bubble/crash go somewhere where they can do no more harm.

"This isn't the place for a detailed analysis of America's economic position"

Wise choice Stephanie :)

We are all living beyond our means and it seems the 'richest' country in the world is living furthest beyond its means. Who is for a trip to a mountain top to await the end of the economic world as we know it?

Good evening Fanny!

I think Larry Summers probably made the right decision to go back to Harvard. It would be foolish to expect Ben Bernanke to be leaving the Fed as he has done a superb job (along with Merv and others of course) in preventing a worldwide depression.

Of course some do not appreciate how good we have it because we had a recession but that's because it is hard to appreciate how terrible it could have been.

In other words the 'stimulus packages' are failing on both sides of the Atlantic as GDP is not a good measure of ours or anyone else's overall economic and other well being and performance.

The US has no 'plan B' at the moment until the mid-term elections spell the end for Obama.

The US will bounce back when we see 'economic fortress USA' and a new US energy policy ... but this is not good news for global recovery ... but global recovery is not a good thing either as can only increase consumption of scarce global resources.

No doubt these neoliberal organizations love consumption taxes, they are just another vehicle to shift tax burden on the shoulders of low and middle income people. They consume most of their income while upper income brackets have something to save.

It says all about these people when they recommend taxes that penalize consumption and encourage saving in a time when world is suffering from massive under-consumption. Neoliberalism, born out of racism and people-hatred, never was working economic philosophy anyway, just an instrument of class warfare, waged from the top.

@13
Yep - the consumption taxes are so high and goods so expensive that low & middle income people need to borrow just to buy the basics. Where will it all end?

11. At 10:04pm on 22 Sep 2010, Lindsay_from_Hendon wrote:

Of course some do not appreciate how good we have it because we had a recession but that's because it is hard to appreciate how terrible it could have been.
----------------------------------------------------------------------
Sadly true.

While I am not fully in the 'total doom, gloom and it's all going to fall apart the revolution is coming and it will be torn down' camp' it should be remembered that a lot of the underlying problems are still there and unchanged from 2007. Some new triggers or the reappearance of the old ones in greater magnitude or in a way that they work on and multiply each other and it could happen again.

Hey! Let's be careful out there, today.

13.ZFR said "It says all about these people when they recommend taxes that penalize consumption and encourage saving in a time when world is suffering from massive under-consumption."

You must be joking? The world is most definitely not suffering from under-consumption.

It is most definitely suffering from denial and a thought process that continuing to do the same thing will miraculously bring different results.

An economy that has been built upon unsustainable use of non-renewable resources at an exponential rate to achieve exponential growth, and a short-term focus of economic planning, has led us to where we are today.

We have consumed without adequate re-investment. Too much of our wealth has been allowed to go into non-productive areas of the economy (complex financial trading and high risk credit) and no where near enough has been set aside for investment into new energy and material resources research and development.

The world has had a century of plenty and has squandered it largely on huge microbe like population growth and short term consumptive spending, and not invested it wisely into the development of long term sustainable energy sources, population levels where everyone has a decent standard of living and a prosperous future, and sustainable agriculture.

There may still be time to mitigate the worst consequences of this, but a huge amount of political (citizen supported) will is required urgently.

If we simply have faith (belief without evidence) that we will develop miracle cures to keep our way of life going we will be disappointed.

It's hard to contemplate what if any impact this event will have on the President as he will surely fill the gap with any number of others. What we can be sure of is that the timing was not just a coincidence. The US's stimulus package has now been seen as in part if not a total failure. The economy is slowing again and the jobless is being forecast to rise in the coming months. The big "O" needs a miracle as he is going to be a President with no house support. It will be almost impossible for him to get anything through Congress and the House of Representatives.

On the other side of the pond we have our problems to. The EU still has the PIIGS and it now looks as if the recovery is now stalling. There are rifts between the group of two with France now throwing it's teddy out of the pram and Germany being left to hold the baby by itself. A task that will be just too big an ask. So how long before the vultures start circurling. There are already rumors starting once again around the viability of the Euro.

It's hard to contemplate what if any impact this event will have on the President as he will surely fill the gap with any number of others. What we can be sure of is that the timing was not just a coincidence. The US's stimulus package has now been seen as in part if not a total failure. The economy is slowing again and the jobless is being forecast to rise in the coming months. The big "O" needs a miracle as he is going to be a President with no house support. It will be almost impossible for him to get anything through Congress and the House of Representatives.

On the other side of the pond we have our problems to. The EU still has the PIIGS and it now looks as if the recovery is now stalling. There are rifts between the group of two with France now throwing it's teddy out of the pram and Germany being left to hold the baby by itself. A task that will be just too big an ask. So how long before the vultures start circling. There are already rumors starting once again around the viability of the Euro.

Even the BRIC countries are having difficulties.

Never mind we are living in the country where we have eliminated Boom & Bust. In fact we are doing so well the HMRC is about to give over a billion back as a tax break by writing off owed back PAYE tax.

We have never had it so good......

#16 SoC -

So true! And we are so short-sighted. It took a long time to inflate this bubble to the size it is, and it will deflate - that's what bubbles do. The size of the bubble is enormous and I doubt if we can stand a rapid collapse without a fair bit of turbulence, so a slow, "controlled" adjustment would appear a better option. No one, of course, can foresee what a slow, controlled process will produce either, but there may be more chance of adapting as we go.

If you want to worry, worry about the water (and food) wars that will be with us soon. If you have any sense, realise it is too late to change anything much, and just enjoy each day as it comes. Try and be nice to each other - it helps a lot.

Economics is brilliant for explaining the past; politics is brilliant for weaving a zig-zag course for the present; religion for heading in one arbitrary direction or another into the future based on blind faith.

Where, after all the centuries of accumulated wisdom, is the science or philosophy that we should have developed to guide our actions? The fact that it is not there, must indicate that it will never be there. You have to accept that as a characteristic of the way we are, and an indication that we might not be as great as we think we are. Stop looking to rationalise everything and just enjoy - only way!

Have a good day, everyone.

In terms of Larry Summers departure it would appear that the Financial Times does not quite value him as Stephanie does. Rather than her description of an "economic superstar" we get "Summers departure opens the door for new ideas" which is a very differne perspective.

Shock news printing loads of cash did not work. What to do? Big money printing to start up again.

Big inflation coming down track! toot toot.

The spectre of deflation was made up by economists. It is a made up idea to persuade fools that printing loads of dosh is the way to help a society save itself from people who are insolvent and are about to be forced to experience a drop in their standard of living. Essentially its an attempt to break a law of nature. Bubbles and booms are followed by crashes.

Deflation only really exists when populations fall sharply. See Europe Black Death, 14th Century.

19. Dave Francis

Too true.

However, my hope is that we CAN learn to apply our intelligence to more critical thinking and implement a system of constant checks and balances and "what if" questions and scenarios.

We simply need to learn from our mistakes of the past and apply our intelligence towards engineering our future and planning sustainably.

I believe we can do this but it takes the realisation that we have to keep constantly thinking about cause and effect and sustainability.

Basically we need to get our brightest and best working on developing ongoing and growing prosperity (not growth) instead of making a "fast buck".

16. At 09:04am on 23 Sep 2010, Sage_of_Cromerarrh wrote:
13.ZFR said "It says all about these people when they recommend taxes that penalize consumption and encourage saving in a time when world is suffering from massive under-consumption."

You must be joking? The world is most definitely not suffering from under-consumption.
*-*-*-*-*-*-

Sorry Sage, but I disagree, we have many unemployed, ie they do not have jobs doing productive work and earning a wage. We also have many under-employed doing jobs but not using their skills to the full because there aren't jobs for them for their full potential. Therefore, there is not enough consumption to employ everyone.

What we do have is too many people, both in this country and the world; the world's work and demand for goods and services tend not to think about resources etc and sustainability; humans are a greedy race – so I agree with you there.

We do need a re-alignment/revamp of the world's economy in a way which takes sustainability into account. In the short term we need people employed in productive work.

/news/business-11397875

The question I find myself asking is which ‘analysts’ and how could they possibly think that. Sometime soon they will realise that their models don’t work anymore.

A worthwhile read for today;

#6 BluesBerry, you make some valid points, indeed it's hard to disagree with your arguments. However, your hysterical and repeated prediction of hyperinflation robs you of all credibility. Inflation, yes, maybe as much as 25% I could just about believe, in a perfect storm. But hyperinflation? The first time in history that a wealthy nation experiences peacetime hyperinflation? The world's currency reserves dwindle in value to nothing? Manufacturing is moved en masse from China to the US? The economic engine of the world simply falters and dies, wiping out the biggest export market in the world? Pull the other one.

"Where the economic recovery is concerned, there is at least another hand on the tiller - Ben Bernanke's. The Federal Reserve signalled more strongly this week that it would step in if the recovery faltered."

This^^^

When I was at school I was taught there was a reason why recessions happened. It signalled that an economy had become unbalanced and that resources, be they commodities, employment or investment, were misallocated. A recession enabled these imbalances to re-align. That's hard if it's your company that's become uncompetitive and goes bust and you become unemployed but those that remain become leaner and stronger and new companies arise taking up investment and the slack in unemployment.

It strikes me that over the last two years not only has this not happened but it has actively been prevented from happening! And the Fed "stands ready" to make sure it doesn't happen! In doing so surely all that the Fed and other central banks will do is perpetuate the delinquency in their respective economies and so ensure that when the REAL recession occurs it is of a far greater magnitude worse then, than it might of been if allowed to have happened already.

I can't help feeling that the world going to wake far sooner than later to this emperor with no clothes policy.

23. SLEEPYDORMOUSE

I almost fully agree with you.

We do need more employment.

But we don't need more consumption.

Those that have work need to work less and share it with those that don't. There are some high skill long training period jobs (doctors, dentists, fighter pilots) that this is not possible for but there are many jobs that with relatively small amounts of training it is possible for.

Most people need to get a life that doesn't involve buying stuff with their increased leisure time to make up for lost disposable income . Many will find that they need to take up activities like growing some of their own food, insulating their own houses, spending more time helping with the education of their own and other people's kids, and generally getting involved in their local community.

We have to accept a huge deflation in the cost of stuff like houses in particular land for houses, and an inevitable inflation in the price of commodities such as fuel and food.

You never know we might all be a lot happier and healthier as a result.

19. At 11:04am on 23 Sep 2010, Dave Francis wrote:

Where, after all the centuries of accumulated wisdom, is the science or philosophy that we should have developed to guide our actions?

Have a good day, everyone.
==================================
A. Once upon a time, there was a lawmaker who set out on a grand program of social engineering. Amongst other things, he stipulated that in his jurisdiction, taxes would be collected at a flat rate of 10% of income, and that the civil service, who were in charge of justice, education, welfare and culture (but not defence), should number approximately 8% of the population. Among a number of other economic measures he also ruled that charging interest for loans between citizens was a crime.

That society were assured that by sticking to these principles, they would never need to borrow from outsiders, nor ever sell themselves into slavery.

In short, these philosophies exist, but they interfere more than we would like with our individual ambitions. As a result, they have never been widely accepted. Nor (perhaps the greater pity,) have they ever been enforced equitably by a government with integrity.

In today's post-modernist world, its "every man/woman/child" for themselves. And value is measured in bank-balance alone. "Who wants to be a millionaire"?

These are the key issues...Integrity in government, law-abiding citizens and a socialisation program that teaches people to value the community they live in, in order to re-balance the individualism that we are all born with.

Where those are characteristics of a society, it would be a lot harder to get a crisis of any kind. (Actually, the only threat would be from jealous outsiders.)

Compare it to the daily fare from the news channels...and try to have a good day anyway.

27 Sage

You open up both an old and a new discussion. Those who have read some of my previous posts will know that I am attracted by the ideas of Modern Monetary Theory. I can see difficulties, but on the whole it would lead our, and the world's economy in a better direction than the one we are heading in now. Thus, I am in favour of getting rid of FRB and also having the government issue/spend debt free money.

I would like to see the country's population all engaged in productive employment. This would lead to the shedding of the yoke of debt. At the moment this would be with the current industrial mix; but over a short period, I would hope that the government incentivizes industry to become more sustainable and long term in its outlook. This will have to be a gradual process. With maximised output due to full employment and industry developing sustainable products, we would be able to reach the nirvana you seek.

I agree the world cannot go on as it is. However, the wealth of our nation requires the population to work. I don't believe work-sharing is the answer as the country will not be as wealth as it otherwise could be. Lower wealth to me means that overall we will not be able to afford the services such as healthcare that we need. [an example, there are others]. You are right that we should not become wage slaves, we need a balanced life.

"there are a lot more budget deficits than surpluses"

That is impossible... Ignoring the effects of quantitative easing, there is a finite amount of currency out there and so, consequently for every deficit there must be a surplus.

I think you should talk abot China, its buget surplus, its exchange rate policy and how this distorts international tade...

20. At 11:05am on 23 Sep 2010, Amysmythe :


Well, she did work for (or at least with) him for a while!

and I don't mean anything negative at all in saying that.

30 DavidGraham1984
"That is impossible... Ignoring the effects of quantitative easing, there is a finite amount of currency out there and so, consequently for every deficit there must be a surplus."

Even ignoring QE, the money supply is constantly changing (growing normally). Bank loans typically generate 'new' money in our economy. So when people talk about banks 'net lending', this generally means creating money from nothing under license from the government.

There is however a 'balance'. A government sector deficit is exactly balanced (£ for £) by a private sector surplus and vica versa. In other words the government sector's deficit 'finances' the private sector's overall ability to save.

Kind Regards
Charlie

30 DavidGraham1984

"for every deficit there must be a surplus."

David it may come as a surprise to you to discover that only 3% of the money in the world is actually physical money that you can see or touch.

The other 97% (and climbing, lowering the 'real 3%') is actually produced by banks on a computer to appear on a spreadsheet of the banks assets.

Now consider this, every time someone borrows from a bank, this sum is magically created out of thin air, however the repayments to the bank are real 'earned' physical payments.

Long term it's obvious to see where this scenario is going to end.

Go look up 'fractional reserve banking', plenty about it on the WWW.

30. At 4:31pm on 23 Sep 2010, DavidGraham1984 wrote:

"there are a lot more budget deficits than surpluses"

That is impossible... Ignoring the effects of quantitative easing, there is a finite amount of currency out there and so, consequently for every deficit there must be a surplus.

I think you should talk abot China, its buget surplus, its exchange rate policy and how this distorts international tade...

...........................

It is entirely possible that there are more budget deficits than surpluses as wrapped up in many different currencies and with many govt's creating and issuing more debt than is raised in taxes and revenues.

Wonder if the US tax-GDP ratio covers Federal + State + Local taxes or just Federal ? Could be a slightly distorted picture from the OECD of how much tax the US public really pays.

Comparisons of spending rates between nations only rarely compare like with like.

For example, US health Care comes in at 16% of its national income - which until 2014 is mostly paid directly by patients' insurance policies. In the UK, we chose to pay for our health care (at 8% of national incomes) almost entirely through taxation. Which few other countries do. Adding the USA's 16% health care proportion of income to the US government spending rate produces a much closer comparison to the UK government's spending levels. On the other hand, we have a smaller proportion of children, which means those investment costs in childcare and schooling are lower too.

The Japanese have chosen to have a very low birth rate and correspondingly much lower investment in children. That produces a growing dependency ratio of Japanese pensioners who rely on a declining workforce for their support. Much the same low investment in children applies in Germany, Spain and Italy. Those choices mean lower spending now, with a growing problem in the coming decades. None of those large contingent liabilities are accounted for in your comparisons of spending proportions.

Moreover, until recently we chose to expand the proportion of our population who were in paid employment. That's kept our social liabilities at a lower level than in the 1980s and early '90s with UK tax revenues pushed high enough to cut the standard rate of taxes by 13% to 20p in the pound during the last regime.
National policy choices of investment in health, children, pensions and defence each vary so much between nations as to make bald comparisons of spending proportions a trifle meaningless. Don't you agree?

It's like Hegel said really: thesis- Capitalism, antithesis-Communism and Synthesis...something else.

God knows what it will turn out to be---I'm not sure the Fed or the Bank of England have much of a clue at present.

But hopefully---unlike some economists who seems to think the Chinese model of a money making dictatorship is sort of, kind of..useful--- Hopefully we're presently just working through the process of finding out what it is.

It's very exciting,a bit like being in the London of the late 17th century----- thank goodness we're lucky enough to live in interesting times!

The figures you are quoting from the last goverment were only possible by the revenue the state received from the City. This is where the big dip has been over the last two years.

Secondly there are already those who are saying that the US will not be able to fund their new system and that major changes will have to be introduced to the bill.

Finally the Japanese did not choose to have small families over the last decade or so. This is a result of low child mortality over several decades. Hence there was never a need as elsewhere to have large families to make up for child deaths.

There are facts and then there are dame facts. It is strange how by being and selective you can make anything you want out of unrelated facts. Just as is done with statistics and polls.

29. At 3:31pm on 23 Sep 2010, SleepyDormouse wrote:
-------------------------------------------------------------------------

MMT will not work as it is based on flawed principles.

If you just go back to the very basics.

I have an apple and one person wanted it, it's value will be more than if I had an apple along with ten other people and only one person wanted one.

The same applies in reverse. The more money you put into circulation the less value it will have. This will also inevitably effect the cost of goods. So we will start to see inflation grow higher than we have already.

I unlike many never thought that actions such as the "new deal" ever worked on an economic basis. There was merritt for it on a social basis but not economic. I have always stated that it was the second world war that brought us out of the great depression not anything one country did.

What is happening now is that we have entered a period of global rationalisation. We all have been living well above our means and now is the time for us to have to pay back the credit we have all been living off. This is going to be difficult as we have all grown accustomed to our easy life with easy credit. We were living the dream, buy a house today, keep it for a month or so then sell it on at an obscene profit. We as nation also did this in our economy that is why our manufacturing base declined and the finacail sector has grown. Easy money.....

So has QE worked over here, there is little evidence that it has worked to the extent that it was supposed to. In fact there is a school of thought that all it has done is delayed the inevitable. We as a nation will still at some time have to pay for this action. If not in total just in servicing costs. The same has been said for actions taken else where especially in the US.

To be fare MMT could work if we as a nation could operate totally independently from the rest of the world, say as a marxist state. Oh sorry this fails as well as money is replaced with other commodities such as power. Power from being a politician. This has been demonstrated in China, Russia, Cuba....... Etc. The same can be also shown in states that are ruled by religious factions.

MMT is a nice theory but one that unfortunately will not work, it will go under the heading of Nice Thought.

I find it strange that we are not discussing the state of the EU. It's recovery is faltering and a number of it's states are slipping back into recession, if they actually ever climbed out of it. The Euro still has it's own "Sword of Damocles" in the form of the PIIGS. This could be a story that could develop quite quickly and definitely will have an impact on us here in the UK.

23. At 12:09pm on 23 Sep 2010, SleepyDormouse wrote:
16. At 09:04am on 23 Sep 2010, Sage_of_Cromerarrh wrote:
13.ZFR said "It says all about these people when they recommend taxes that penalize consumption and encourage saving in a time when world is suffering from massive under-consumption."

You must be joking? The world is most definitely not suffering from under-consumption.
*-*-*-*-*-*-

Sorry Sage, but I disagree, we have many unemployed, ie they do not have jobs doing productive work and earning a wage. We also have many under-employed doing jobs but not using their skills to the full because there aren't jobs for them for their full potential. Therefore, there is not enough consumption to employ everyone.

What we do have is too many people, both in this country and the world; the world's work and demand for goods and services tend not to think about resources etc and sustainability; humans are a greedy race – so I agree with you there.

We do need a re-alignment/revamp of the world's economy in a way which takes sustainability into account. In the short term we need people employed in productive work.
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If I may be permitted to barge in on this with an observation ... ?

If you give unprecedented earning capability to a growing number of people and at the same time give them a too benign fiscal structure and you continue to spend as a State increasing amounts on a SHRINKING (until recently) UK population and charging the bulk of the cost of that to the lowest earners then there will be an inevitable reduction in consumption.

#38 Chris London,

Well said Nuff said

#40 Chris London

This is becoming a 'love in'! Once more I totally agree with you. I believe that Europe is a slow burn (I and others were predicting trouble 2 years ago) but just like the old clothes copper when she blows, she blows.

It will be more than just the UK who feel the impact.

41, UPTOSNUFF wrote: If you give unprecedented earning capability to a growing number of people and at the same time give them a too benign fiscal structure and you continue to spend as a State increasing amounts on a SHRINKING (until recently) UK population and charging the bulk of the cost of that to the lowest earners then there will be an inevitable reduction in consumption.

Below are the actual figures from the UK population 10 year sensuses (sensi?) of the last 110 years. Contrary to your assertion above you will see that the UK population has never been "shrinking" in any decade throughout that time. It currently stands at around 62 million.

1901 38,328
1911 42,138
1921 44,072
1931 46,074
1941 48,216
1951 50,290
1961 52,807
1971 55,928
1981 56,352
1991 57,808
2001 59,009

The figures show a decrease in the rate of increase 1971 to 1991 but still an increase. This rate of increase has gathered pace since 1991 and we are predicted to be over 70 million within 20 years from now.

There will be a reduction in population and consumption because we are reaching peak everything related to oil for it's extraction and production (including food). The current world economic malaise is the first symptom of it. Future price shocks in food and energy will continue this trend for a few years until it becomes generally realised that the "growth business as usual" boom -bust cycle is history.

Then maybe we will apply our finest brains to sustainable prosperity instead of quick buck ponzi scheme economics.

We live in hope.

#39 Chris London

This is incorrect. Putting more money into circulation is not the same thing as creating money. As you can see with the recent QE effects, issuing money did not result in more money going into circulation.

Further, the private sector has been, through the creation of loans, expanding the money supply exponentially. Was inflation throughout the West similarly exponential?

Yet further, the clime is deflationary - people are deleveraging, repayments are going back into bank reserves as money quantities drop and money quantities in circulation drop.

45. At 11:06am on 24 Sep 2010, Oblivion wrote:
Further, the private sector has been, through the creation of loans, expanding the money supply exponentially. Was inflation throughout the West similarly exponential?
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assuming that you mean that the answer to the second part is No, does that make you doubt the first statement?

#44 Sage,

Oh come on Sage! Now I know that poulation is your hobby-orse but really you have presented some misleading data in response to Up2snuff. It's not even information in that sense because it does not make sense.

The sum totals are pretty irrelevant. The decline that he alludes to is firstly in the population of working age and secondly in the numbers of children - both of which have significant economic and political consequences.

My own opinion is that we have very little power with which to influence the poulation growths beyond our own shores. We can try and promote domestic growth but there is little in terms of acceptable policy that we can do to reduce it.

We do have an EU open door and we should not try to close that. However, we do have to be more strict when it come to non-EU economic migrants. We do have to be more strict when it comes to ICTs and we do have to police more efficiently the return of 'students' from overseas when their courses have either finished or they have failed their study programmes.

Two strategic issues are irrevocably linked with such a policy. Firstly we have to have a massive increase and improvement in our vocational training/educatio. Secondly we need a clear protectionist policy to be implemented.

45. At 11:06am on 24 Sep 2010, Oblivion wrote:
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QE is a bad example as this has had a limited exposure namely into the bond markets and shoring up the funds. Yet all admit that at some stage funds will have to be recovered which will have an adverse effect on the markets. It was hopped that this would be done after the recovery so the effect could be minimised. However it now looks as if this may have to happen before which in turn could prolong the period of recovery. MMT is more about printing money to create internal demand hence drive the economy. The result in carrying out such an action has always and will always cause inflation and devaluation.

Back to QE - A report last week from Japan states "Bank of Japan Governor Masaaki Shirakawa said on Thursday that quantitative easing policies had a limited effect on stimulating the economy and prices.

"We hardly observe the fact that massive expansions in central bank balance sheets result in an increase in inflation in advanced economies," Shirakawa said in a speech at a conference.

The BOJ has kept interest rates near zero. But it has been hesitant about returning to quantitative easing, a policy of flooding markets with excess cash taken in Japan from 2001 to 2006"

Need I say more?

re #44
Sage, you are quite right. I was thinking with one brain cell about falling birth rate and less taxpayers while not thinking with the other brain cell at all.

I would actually join with you and quibble with the official figures anyway. They probably should be a lot higher. [Seem to recall the 2001 figures were recently adjusted upwards for the second time.] Hopefully the point I was making was not totally obliterated by the blunder.

47. Foredeckdave, why we can just assume that the retirement age of a population has to remain fixed when both life expectancy has increased massively and affordability of state pensions has decreased massively seems totally illogical and un-workable to me. The absolute population numbers are a given and that is the number of mouths that have to be fed regardless of their age.

In recent years we have had an effective narrowing of the working age population from both ends. People live longer so there are more people beyond working age, and more people go into higher education and post 16 education instead of earning at 16 so there are more people in the pre-working age bracket. This is unrealistic and we have to raise the retirement age for state pension considerably to keep the ratio of working age to non working age more in balance.

We will also have to look at higher education and be more selective about the number of students in higher education on a full-time basis and probably adopt a day release type approach to many degrees and diplomas.

All of these modern day perks will have to be re-considered in the near future as we come to realise that without cheap oil and other resources the exponential growth of everything party is over.

To keep saying things are politically unacceptable is I'm afraid just plain unacceptable in the times we are in. Sometimes you have to do what is necessary and we will all have to learn to live with less consumption permanently.

UP@SNUFF,

No I understood what you were saying and I agree that a reduction in consumption is absolutely inevitable.

re #47
Thanks for trying to understand me when I wasn't understanding myself.

Yep, the point is that public spending pressures in places were dipping when spending was being increased as incomes were being squeezed and the tax burden - for many - increased.

School spending under New Labour was massive but school rolls were actually falling for most if not all of the period. I had this and similar situations in mind.

Sort of.

I think.

Maybe.

Nighty nite one and all.

A decent sized war wipes out your debts in double quick time.

Of course it has to be paid for sometime!

53. At 07:31am on 25 Sep 2010, onebadmouse wrote:
A decent sized war wipes out your debts in double quick time.

Of course it has to be paid for sometime!

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That fear lurks in the back of some minds. As does the thought of some chumps deciding to re-run the Russian 1917 revolution in 21st century UK.

No more Summers for Obama


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Then its back to "No Frills" or Marks & Spencer for Obama

In these 0stear times its big ticket items on eternal credit that have to go.


What's wrong with sackcloth and ashes anyway ?.

What is happening is very clear. The Republicans having voted to deregulate banks so they would be free to play whatever games they cared to with federally insured depositors money, and the Democrats having voted to deregulate banks so that they would lend as much money as anyone who wanted to buy a house asked for have given the financial sector license to bankrupt itself on a scale the likes of which the world has never seen before. In a desperate effort to rescue the banking sector, the US government has effectively shoveled all of its money at the banks by giving it to them at 0% interest and borrowing it back at 3% interest guaranteed 100% safe. The government has not only diverted all credit to the banks robbing the rest of the economy of any chance to really recover from the damage the finance sector did to it, it has given the banks license to suck up every last cent anyone in America still has. All of this on the hairbrained theories of economics and finance that were born in that wretched cesspool of ignorance and stupidity Harvard Business School about 60 years ago and was spewed all over the world since. At the rate things are going, it won't be much longer before the entire world is flat broke. The banks will have all of the money but it won't matter, there won't be anything anyone can buy with it and it will be worthless. The very concept of money will be dead, killed off by economists who god Alan Greenspan admitted two years ago in testimony before Congress that "there's something about markets I don't understand." Talk about an understatement.