Conservative 7 Billion Spending Cuts a Drop in Britain's Debt Ocean

[Le Stu]

http://www.marketoracle.co.uk/Article14040.html

Check it out, even the guys who claim to be levelling with us are just 7 billion less full of shit. We're spending that in less than a month...

[Guest Gladstone]

I'm no expert in politics or economics, but was it a really really bad idea that we didn't join the Euro?

[Le Stu]

I'm no expert in politics or economics, but was it a really really bad idea that we didn't join the Euro?

That's debatable. It would force fiscal discipline on our government but we'd be unable to allow a natural devaluation of the pound which would benefit our export sector and reign in consumer spending on imports.

Also, the ECB are ruining the Euro, just not half as much as we're debasing Sterling.

[Scootray]

That's debatable. It would force fiscal discipline on our government but we'd be unable to allow a natural devaluation of the pound which would benefit our export sector and reign in consumer spending on imports.

Also, the ECB are ruining the Euro, just not half as much as we're debasing Sterling.

I always knew cricket was shit.

[Le Stu]

I always knew cricket was shit.

Never been a fan of it myself but this is one hell of a sticky wicket and all our bowlers seem to be shite.

[Cloud]

Also, the ECB are ruining the Euro, just not half as much as we're debasing Sterling.

If anything, they've shown that they're actually handling it well - the Euro hasn't suffered at all during the crisis, and they've shown restraint in letting new members into the 'club' - I thought they would try and accelerate the entry of the places like Estonia and Lithuania, but clearly not.

They've also managed to keep places like Ireland in the Euro when it looked like they might end up having to leave - so as far as I can tell, so far, so good.

[Le Stu]

If anything, they've shown that they're actually handling it well - the Euro hasn't suffered at all during the crisis, and they've shown restraint in letting new members into the 'club' - I thought they would try and accelerate the entry of the places like Estonia and Lithuania, but clearly not.

They've also managed to keep places like Ireland in the Euro when it looked like they might end up having to leave - so as far as I can tell, so far, so good.

The problem the central banks have created will manifest itself a little further down the road, once we get through this initial deflationary phase. The excessively loose monetary policy adopted by virtually every central bank in the wake of last year's bust is going to result in price increases when the velocity of money picks up. That's when the ECB is going to come under pressure to raise rates and they're going to have to do it very aggressively. That's when Ireland is really going to buckle under the strain.

My point was that just because the ECB has been a little more reserved then the US Fed or the BoE it just amounts to them being only half crazed.

[Pierre Von Mondragon]

*Chants*Eur-O, Eur-O, Eur-O.

Its the bit about the economic 'death spiral' that I find amusing/fear horribly.

Cameron's dud options | David Blanchflower | Comment is free | The Guardian

Sorry to quote the Grauniad again.

Fuck it, no I'm not.

[Le Stu]

*Chants*Eur-O, Eur-O, Eur-O.

Its the bit about the economic 'death spiral' that I find amusing/fear horribly.

Cameron's dud options | David Blanchflower | Comment is free | The Guardian

Sorry to quote the Grauniad again.

Fuck it, no I'm not.

I swear J M Keynes is spinning in his grave. His whole deal was that the government should deficit spend on public works and services to support industry in times of crisis.

We don't have any industry.

Therefore, we're just pissing money up the wall to make our GDP look better so that these bastards stand a chance of getting re-elected. The real danger is that the Chinese are gonna figure this out before the boneheads in Westminster do and pull the fucking plug on us. That is my fear and it'll make 50 billion a year spending cuts seem like Christmas.

[Pierre Von Mondragon]

I read recently that the UK is still 6th or something in the world list of manufacturing powers, according to some social inadequate/MP. Probably making dildos out of old plastic bags or somesuch, not anything cool, that shit got well shut down.

Here it is, I haven't read it all, as my insomnia is under control.House of Commons Hansard Debates for 09 July 2009 (pt 0014)

[Pierre Von Mondragon]

I swear J M Keynes is spinning in his grave. His whole deal was that the government should deficit spend on public works and services to support industry in times of crisis.

We don't have any industry.

Therefore, we're just pissing money up the wall to make our GDP look better so that these bastards stand a chance of getting re-elected. The real danger is that the Chinese are gonna figure this out before the boneheads in Westminster do and pull the fucking plug on us. That is my fear and it'll make 50 billion a year spending cuts seem like Christmas.

Yeah, we don't need any public works, what with our perfect and shiny infrastructure.

Sorry, I'm feeling sarktastic to be back at work today. If they spent it (the gazillions)on nice trains, that would be a start.

[Le Stu]

Yeah, we don't need any public works, what with our perfect and shiny infrastructure.

Sorry, I'm feeling sarktastic to be back at work today. If they spent it (the gazillions)on nice trains, that would be a start.

What use are shiny new ports and trains and roads when there are no new factories and mines and farms making shit to transport on them? Our primary and secondary industry doesn't support our consumptive habits, whether private or public, so we are basically continuing to dig our way into a massive hole with this government debt.

There's also the 'crowding out' theory which is a criticism of Keynes regarding the massively increased sale of gilts creating a market preference for government debt, which is traditionally the best high yield, low-risk paper you can buy so that is a compelling argument in my opinion. So, deep spending cuts could potentially free up a lot of capital for investment where it's needed in our economy.

It's really going to suck though. Structurally high unemployment for years to come and diminished public services. This is unlike any post-war recession.

[Le Stu]

I read recently that the UK is still 6th or something in the world list of manufacturing powers, according to some social inadequate/MP. Probably making dildos out of old plastic bags or somesuch, not anything cool, that shit got well shut down.

Here it is, I haven't read it all, as my insomnia is under control.House of Commons Hansard Debates for 09 July 2009 (pt 0014)

It's worth 150 billion per year to the economy according to that. We're gonna borrow 200 billion alone this year! And the BoE is gonna buy about 30% of those gilts.

Yeah, the BoE are financing a shortfall in our shortfall. I don't wish to appear ALARMIST but that's pretty fucked.

[Pierre Von Mondragon]

Manufacturing issues aside, decent infrastructure has the power to improve the lives of everyone on our (Service) Sectored Isle, so we can be happier in illiberal Hell. Right now, we're pretty doomed, but thats no doom at all compared to that which Cutter Cam'ron has in store. Public Sector revolt won't be the quarter of it.

Balls to it all, I'm off hame.

[Le Stu]

Manufacturing issues aside, decent infrastructure has the power to improve the lives of everyone on our (Service) Sectored Isle, so we can be happier in illiberal Hell. Right now, we're pretty doomed, but thats no doom at all compared to that which Cutter Cam'ron has in store. Public Sector revolt won't be the quarter of it.

Balls to it all, I'm off hame.

Bleh, I hope not. I was planning on doing the Xmas elf slog at Royal Mail this year, and I don't really want to be crossing a picket line.

I don't like unions much, but I do respect their right. Also, I don't like people shouting SCAB at me and ducking bricks.

Now, just so people can get a grip on our BLOOD CHILLING situation, let's throw in a few charts from the good 'ol Weimar Republic (lol)

Weimar charts - iTulip.com

I like the gold one, in particular.

This article is great also:

He foresaw the mortgage mess; now, he sees an inflation wreck | Money & Company | Los Angeles Times

There have been 28 episodes of hyperinflation in national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz, professor emeritus of economics . . . at the University of Basel, has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, "Monetary Regimes and Inflation: History, Economic and Political Relationships," Bernholz analyzes the 12 largest episodes of hyperinflation -- all of which were caused by financing huge public deficits through monetary creation. His conclusion: The tipping point for hyperinflation occurs when the governments deficit exceeds 40% of its expenditures.

Let's be clear that this is the absolute worst case scenario for us but unless our government reverses course, and they will need some real fucking stones to do so, it becomes more and more likely every day.

[Pierre Von Mondragon]

Respec' for actually ploughing through hunners of figures and tables though, if I tried my brain would start dissolving itself as a defence mechanism. Is there a chart which charts our current position in relation to the Weimar figures, are they directly comparable, or are things measured with different indices now, and do I really want to know*. I'm generally quite optimistic in general, as humanity usually manages a goal-line clearance from self-made disasters, but then again, just because we usually muddle through, does not mean we always will.

*And if I did know would I immediately start stockpiling canned goods.

[Le Stu]

Respec' for actually ploughing through hunners of figures and tables though, if I tried my brain would start dissolving itself as a defence mechanism. Is there a chart which charts our current position in relation to the Weimar figures, are they directly comparable, or are things measured with different indices now, and do I really want to know*. I'm generally quite optimistic in general, as humanity usually manages a goal-line clearance from self-made disasters, but then again, just because we usually muddle through, does not mean we always will.

*And if I did know would I immediately start stockpiling canned goods.

Well, I already do 'cos I eat tinned food anyway, and it lasts ages so I have a rotating inventory. My friends snigger at the 100 or so cans of beans in my hallway, of course. I also own a bit of gold through bullionvault, though I don't know if that's gonna be of use in a Weimar style meltdown.

That chart I posted isn't that great, to be honest. They seem to have have an exponential scale on the left but it seems like a linear chart and the axes are unlabelled. I just wanted to illustrate what an exponential increase in money supply does to the cost if living and how assets track it.

One problem in making a comparison between now and then is that the way money is created today is frighteningly complex. The other is that CPI is a bogus measure of the cost of living, corrupted by hedonic adjustments and the removal of assets such as housing which still clearly contribute to the cost of living. Right now, we have low inflation according to the CPI, but we clearly have deflation from the housing bust which isn't part of that measure. The M4 money supply is plummeting but hyperinflation isn't caused by excessive lending but rather a run on currency caused by unserviceable external debt, such as the war reparations the Germans were under obligation to pay to foreigners.

Here's the 'brown trousers' debt chart from the original article I posted though. It's not based on official figures but a best guess by an analyst:

[aberdoom.com]

what would have happened if they had let b ^b and northern rock collapse?

[Le Stu]

what would have happened if they had let b ^b and northern rock collapse?

The recession would be slightly sharper, private sector losses and unemployment higher, and a lot of commercial real estate would be up for lease. However, the problems would be permanently fixed and that chart would be slightly shorter by tens or even hundreds of billions. You know, the amount they're now going to have to cut from the public sector spending.

Should be in boxes next to Lehman Bros, IMO. The whole fucking lot of them.