laticsrblue Posted October 21, 2009 Share Posted October 21, 2009 (edited) I do not think many sensible people have an issue with the response... It is what lead us to the crisis that people get angry about... Wasn't that due to the fact that banks in the US were lending money and giving mortgages to people who had no chance of paying back the loan, then selling on the bad mortgages etc bundled with good ones to other banks worldwide. Thus putting us all in the mire when people couldn't keep up there payments. Edited October 21, 2009 by laticsrblue Quote Link to comment Share on other sites More sharing options...
garcon Posted October 21, 2009 Share Posted October 21, 2009 It's probably true that the response would have been similar whoever was in power, borne out by the similar response around the world. However, the debate gets more interesting when you look at how well different economies have coped with the recession and take a view on the true strength of our economy beforehand. My own conclusion is that the fault lies squarely with Brown for the plain fact that the UK has been hit much harder by this crash than many similar economies. Quote Link to comment Share on other sites More sharing options...
Corporal_Jones Posted October 21, 2009 Share Posted October 21, 2009 It might not of been "primarily" public spending but it certainly was a factor.... There was issues with the economy as a whole...accept that... Another way of putting it is that public spending would not be the issue it currently is if the wider economy on which it rested hadn't been brewing up the worst crisis since the 1930s. Quote Link to comment Share on other sites More sharing options...
leeslover Posted October 21, 2009 Share Posted October 21, 2009 Which wasn't primarily public spending. The level of public spending was dependent on the wider economy, which was resting on a far more fragile base than anybody was prepared to let on. I would agree with all of this although not entirely in the way you mean. The very large growth in spending over the last 10 years , borrowing in the boom times, obviously set us up for massive borrowing with the downturn came. At the same though the spending diverted people and resources away from the productive sector of the economy into government positions. As we have seen the response so far to private jobs being lost has been for the government to look to employ even more people (directly or indirectly), so there are even fewer private jobs creating the money for ever more government jobs. The cake shrinks but half the people still get as much cake, it doesn’t leave much for the other half. Quote Link to comment Share on other sites More sharing options...
oafc0000 Posted October 21, 2009 Share Posted October 21, 2009 Wasn't that due to the fact that banks in the US were lending money to people who had no chance of paying it back, then selling on the bad mortgages bundled with good ones to other banks worldwide. Thus putting us all in the mire when people couldn't keep up there payments. That is the nice fluffy simplified version... When you start digging into it and uncovering how the lack of regulation in the UK banks allowed UK based banks to walk head first into a disaster then you start seeing it as a problem which was not just generated in the US... I do not understand all the ins and outs though either... Quote Link to comment Share on other sites More sharing options...
Corporal_Jones Posted October 21, 2009 Share Posted October 21, 2009 It's probably true that the response would have been similar whoever was in power, borne out by the similar response around the world. However, the debate gets more interesting when you look at how well different economies have coped with the recession and take a view on the true strength of our economy beforehand. My own conclusion is that the fault lies squarely with Brown for the plain fact that the UK has been hit much harder by this crash than many similar economies. It's no accident that the so-called Anglo-Saxon model crashed first and seems set to fare the worst. And to think that Blair used to lecture the likes of Germany and France about the need to emulate the US. Quote Link to comment Share on other sites More sharing options...
laticsrblue Posted October 21, 2009 Share Posted October 21, 2009 (edited) That is the nice fluffy simplified version... My thesis is on it way, maybe out sometime in 2011. Edited October 21, 2009 by laticsrblue Quote Link to comment Share on other sites More sharing options...
oafc0000 Posted October 21, 2009 Share Posted October 21, 2009 My thesis is on it way, maybe out sometime in 2011. Well I hope it is not as simple as you just described Quote Link to comment Share on other sites More sharing options...
Corporal_Jones Posted October 21, 2009 Share Posted October 21, 2009 I would agree with all of this although not entirely in the way you mean. The very large growth in spending over the last 10 years , borrowing in the boom times, obviously set us up for massive borrowing with the downturn came. At the same though the spending diverted people and resources away from the productive sector of the economy into government positions. As we have seen the response so far to private jobs being lost has been for the government to look to employ even more people (directly or indirectly), so there are even fewer private jobs creating the money for ever more government jobs. The cake shrinks but half the people still get as much cake, it doesn’t leave much for the other half. Maybe so, but again, I doubt if any government would have acted all that differently. Even a Tory government, having restructured the economy on the basis of a shrinking manufacturing sector, would have increased spending on the back of the apparent boom that was taking place, and would have had no choice other than to increase public sector employment as job opportunities were slow to expand elsewhere. It's all very well to say, as all three main parties do in one way or another, that everybody should have a chance of higher education, but by and large these kids will graduate expecting a junior management position. Where else will they look apart from the public sector in the absence of such positions elsewhere? The best of them (or those with the best contacts) might go into industry, but industry isn't what it was, and while there might have been plenty of service sector jobs being created, these evidently don't fulfil the apirations of such people, nor pay them the kind of wage they've, rightly or wrongly, been led to expect. It was inevitable that as the industrial base of the country came to be run-down that the public sector would be used as a sponge to soak up the excess labour force. And that's leaving aside the role of higher education as 'social parking' (keeping the unemployment figures down.) Quote Link to comment Share on other sites More sharing options...
Corporal_Jones Posted October 21, 2009 Share Posted October 21, 2009 I do not understand all the ins and outs though either... Ever thought about a top position in a major bank? Quote Link to comment Share on other sites More sharing options...
oafc0000 Posted October 21, 2009 Share Posted October 21, 2009 Ever thought about a top position in a major bank? Quote Link to comment Share on other sites More sharing options...
tangerinedreams Posted October 21, 2009 Share Posted October 21, 2009 (edited) Maybe so, but again, I doubt if any government would have acted all that differently. Even a Tory government, having restructured the economy on the basis of a shrinking manufacturing sector, would have increased spending on the back of the apparent boom that was taking place, and would have had no choice other than to increase public sector employment as job opportunities were slow to expand elsewhere. It's all very well to say, as all three main parties do in one way or another, that everybody should have a chance of higher education, but by and large these kids will graduate expecting a junior management position. Where else will they look apart from the public sector in the absence of such positions elsewhere? The best of them (or those with the best contacts) might go into industry, but industry isn't what it was, and while there might have been plenty of service sector jobs being created, these evidently don't fulfil the apirations of such people, nor pay them the kind of wage they've, rightly or wrongly, been led to expect. It was inevitable that as the industrial base of the country came to be run-down that the public sector would be used as a sponge to soak up the excess labour force. And that's leaving aside the role of higher education as 'social parking' (keeping the unemployment figures down.) In my experience the younger generation ie: those who are leaving college/ university want top paid jobs straight away and aren't prepared to sweep the floors or be the tea person for a period of time, perhaps their value of money has something to do with this, whereas pocketmoney when I were a lad (I didn't receive any) was maybe a few quid, they are looking at perhaps a score nowadays, you only have to look at how much is being spent on them for Xmas/ birthdays etc, you get my general drift though. Edited October 21, 2009 by tangerinedreams Quote Link to comment Share on other sites More sharing options...
Corporal_Jones Posted October 21, 2009 Share Posted October 21, 2009 In my experience the younger generation ie: those who are leaving college/ university want top paid jobs straight away and aren't prepared to sweep the floors or be the tea person for a period of time, perhaps their value of money has something to do with this, whereas pocketmoney when I were a lad (I didn't receive any) was maybe a few quid, they are looking at perhaps a score nowadays, you only have to look at how much is being spent on them for Xmas/ birthdays etc. That, love it or loathe it, is the mass consumer society for you. No upside without a downside. Quote Link to comment Share on other sites More sharing options...
tangerinedreams Posted October 21, 2009 Share Posted October 21, 2009 That, love it or loathe it, is the mass consumer society for you. No upside without a downside. Christ, do you keep hitting F5? Quote Link to comment Share on other sites More sharing options...
Stitch_KTF Posted October 21, 2009 Share Posted October 21, 2009 For anyone who doubts how seriously screwed our national economy is and thinks we're on our way back up again... Would you care to guess (or Google ) two figures for me? 1. Our current national debt. 2. How much of our money the government paid out solely in interest on that debt last month. I always ask myself the same question when considering massive government debts the world over. Maybe the resident OWTB economists can answer where a host of documentaries and articles have failed..... Seeing as near enough every pound/dollar/euro in circulation is created by central banks, out of thin air in the form of debt (based on the borrowers promise to repay the loan), seeing as this constitutes nothing but numbers on a computer screen, seeing as it subsequently can't ever be paid back (certainly in terms of principle + interest), why not just write it off at the 'expense' of the institutions ultimately 'owed' the money and start again? Sure, money owed to the Chinese for example needs repaying, but central banks? You can't operate the monetary system we have operated since leaving the gold standard, and expect debts to be repaid? It's impossible? Doesn't 'debt' today simply represnt money, as opposed to money which has to be paid back? Also, Corporal, wont a return to the dark ages be avoided simply by the power of population and their massive productivity? Surely monetary reform would preferable to a life-time of 'slavery'? Quote Link to comment Share on other sites More sharing options...
leeslover Posted October 21, 2009 Share Posted October 21, 2009 I always ask myself the same question when considering massive government debts the world over. Maybe the resident OWTB economists can answer where a host of documentaries and articles have failed..... Seeing as near enough every pound/dollar/euro in circulation is created by central banks, out of thin air in the form of debt (based on the borrowers promise to repay the loan), seeing as this constitutes nothing but numbers on a computer screen, seeing as it subsequently can't ever be paid back (certainly in terms of principle + interest), why not just write it off at the 'expense' of the institutions ultimately 'owed' the money and start again? Sure, money owed to the Chinese for example needs repaying, but central banks? You can't operate the monetary system we have operated since leaving the gold standard, and expect debts to be repaid? It's impossible? Doesn't 'debt' today simply represnt money, as opposed to money which has to be paid back? Also, Corporal, wont a return to the dark ages be avoided simply by the power of population and their massive productivity? Surely monetary reform would preferable to a life-time of 'slavery'? The debt owed by the central banks is an asset to individuals, banks, pension funds, insurance policies etc, and is being paid back all the time, albeit not in a way that means it will ever all be paid off. It’s the safety net of these funds, what they rely on to give some stability against share prices falling and so on. Declaring it none-existant would have certain negative consequences... Quote Link to comment Share on other sites More sharing options...
jimsleftfoot Posted October 21, 2009 Share Posted October 21, 2009 That is the nice fluffy simplified version... When you start digging into it and uncovering how the lack of regulation in the UK banks allowed UK based banks to walk head first into a disaster then you start seeing it as a problem which was not just generated in the US... I do not understand all the ins and outs though either... Actually he was correct, there was a lack or regulation but it was the US banks who bundled toxic debts with good debts and sold them on with the best credit rating to other banks around the world. Sometimes the problem was not so much that banks had toxic debts but they didn’t know what the exposure to the toxic debts were. As the banks didn’t know if they could get paid they stopped lending money to each other and to businesses and the general public. Some banks went under as a result, some had to be supported by governments etc. As for how it was dealt with, Gordon Brown had already been spending so had to borrow more money to pay for these cash injections to support these banks which has lead to all the current criticism. However, he has seemingly done a half decent job. Quote Link to comment Share on other sites More sharing options...
Stitch_KTF Posted October 21, 2009 Share Posted October 21, 2009 The debt owed by the central banks is an asset to individuals, banks, pension funds, insurance policies etc, and is being paid back all the time, albeit not in a way that means it will ever all be paid off. It’s the safety net of these funds, what they rely on to give some stability against share prices falling and so on. Declaring it none-existant would have certain negative consequences... Thanks for responding LL, I value your contributions on economic matters and parking tickets especially. So you're saying the central banks don't create the money? They instead have debts themselves? If so, where does money come from? If you meant to say the debt owed to the central banks, then a similar question applies. How does money/debt they create become an asset of others? Simply through the sale of securities and the like? Why would a central bank sell securities when it creates the money in the first place? Why wouldn't they instead create more debt? Quote Link to comment Share on other sites More sharing options...
jimsleftfoot Posted October 21, 2009 Share Posted October 21, 2009 Thanks for responding LL, I value your contributions on economic matters and parking tickets especially. So you're saying the central banks don't create the money? They instead have debts themselves? If so, where does money come from? If you meant to say the debt owed to the central banks, then a similar question applies. How does money/debt they create become an asset of others? Simply through the sale of securities and the like? Why would a central bank sell securities when it creates the money in the first place? Why wouldn't they instead create more debt? The UK government has a decent economy and a good credit rating. This means it can sell bonds and securities to businesses, pension funds, other countries etc as they are seen as sound investments where they will get there money back. If they were to write off these debts, businesses and pension funds would fail, the credit rating would be worthless and our ability to easily manage debt would go down the pan as no one would buy bonds/securities in the future. Quote Link to comment Share on other sites More sharing options...
wozz_oafc Posted October 21, 2009 Share Posted October 21, 2009 I am assuming somewhere along the chain that the debt is backed up by assets somewhere such as gold, land , cash etc? Quote Link to comment Share on other sites More sharing options...
leeslover Posted October 21, 2009 Share Posted October 21, 2009 I am assuming somewhere along the chain that the debt is backed up by assets somewhere such as gold, land , cash etc? Nope, it's backed up by the ability of the Government to shoot people if they don't pay taxes... Quote Link to comment Share on other sites More sharing options...
jimsleftfoot Posted October 21, 2009 Share Posted October 21, 2009 (edited) I am assuming somewhere along the chain that the debt is backed up by assets somewhere such as gold, land , cash etc? No, currencies are inherrently worthless, its all based on trust. This is called the money illusion. We used to use the gold standard which is where a certain amount of money is worth so much gold, but if anything went wrong, people would hoard the gold. The current system is based on Fiat Money, where money only acheives value as a government demands it in payment of taxes. Edited October 21, 2009 by jimsleftfoot Quote Link to comment Share on other sites More sharing options...
oafc0000 Posted October 21, 2009 Share Posted October 21, 2009 (edited) Sometimes the problem was not so much that banks had toxic debts but they didn’t know what the exposure to the toxic debts were. And this is where regulation comes into it... The facts are it was a combination of the banks getting dicked some of the time...but most of the time they knew dam well the risks associated with some of the investments... Most the banks are interlinked... They where dicking over each other... A regulator would of spotted this very quickly... Regulation would also see banks hold back far more money to cover their investments... If they had done this then the banks would not have collapsed in the way they did...and it would of been much less likely that the government would need to step in... Edited October 21, 2009 by oafc0000 Quote Link to comment Share on other sites More sharing options...
oafc0000 Posted October 21, 2009 Share Posted October 21, 2009 No, currencies are inherrently worthless, its all based on trust. true... Quote Link to comment Share on other sites More sharing options...
wozz_oafc Posted October 21, 2009 Share Posted October 21, 2009 No, currencies are inherrently worthless, its all based on trust. This is called the money illusion. We used to use the gold standard which is where a certain amount of money is worth so much gold, but if anything went wrong, people would hoard the gold. The current system is based on Fiat Money, where money only acheives value as a government demands it in payment of taxes. I see, thanks for explaining. So hypothetically what happens to countries if they go bankrupt yet those they owe money to want it back, would the only way to achieve this be through something like a military invasion to take resources? Quote Link to comment Share on other sites More sharing options...
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