Cont: Brexit: Now What? 9 Below Zero

[McHrozni]

"Other countries are becoming unwilling to be further drawn into the collapse of the UK."

The collapse of the UK? You seriously believe that crap?!

"The collapse of the UK"? Credibility: shot.

Because you don't believe it or is there a more compelling reason?

Both Ireland and Scotland have been asking the question in polls and both are within the poll margin of error.

https://en.wikipedia.org/wiki/Opinion_polling_on_Scottish_independence
https://en.wikipedia.org/wiki/United_Ireland

If all you have against this is your opinion, I'm afraid I'll have to ask for more evidence in the matter.

McHrozni

 

[lomiller]

You do realise, don't you (or maybe you don't) that austerity was not intended as a deliberate and long-lasting attack on lower-income and disadvantaged people in the UK*? For all the wrongs and rights of an austerity programme, its sole purpose was to allow for very tight reins on the public finances, in order to allow for rebuilding of the country's balance sheet and regear the economy for anticipated future growth.

If you want to promote economic growth the key is to have the government provide quality services in areas that the free market doesn’t fill very well. Austerity undermines this, so you it doesn’t promote growth, if anything in the long term it does the opposite.

And you do remember, don't you (or maybe you don't) that at the point when the last Labour government left office in 2010, they'd screwed up the public finances to an extraordinary

2010 budget issues were largely a result of the 2008 recession. With the slow recovery, austerity was a terrible idea. Central banks were already pushing on a string and real interest rates were zero. Fiscal stimulus gets overused, but this is a case where it was needed. Austerity was a terrible economic decision in 2010.

BTW, if there were budget issues in 2010 expect worse in 2020-2024 as the recession triggered by Brexit will be deeper than the 2008 recession.

 

[Delphic Oracle]

If you want to promote economic growth the key is to have the government provide quality services in areas that the free market doesn’t fill very well. Austerity undermines this, so you it doesn’t promote growth, if anything in the long term it does the opposite.





2010 budget issues were largely a result of the 2008 recession. With the slow recovery, austerity was a terrible idea. Central banks were already pushing on a string and real interest rates were zero. Fiscal stimulus gets overused, but this is a case where it was needed. Austerity was a terrible economic decision in 2010.



BTW, if there were budget issues in 2010 expect worse in 2020-2024 as the recession triggered by Brexit will be deeper than the 2008 recession.

When the government makes big reductions in spending, this changes both the numerator and denominator of the debt-to-GDP figure. When done at the same time as a downturn in private expenditures (both individual and corporate), this inevitably means the GDP shrinks in greater proportion.

Politicians who push this strategy are either ignorant of this reality or purposefully advocating it for their own gain.

 

[ceptimus]

Because the obvious thing to do when you're deeply in debt is to borrow more than ever and spend your way out of trouble.

 

[Giordano]

Because the obvious thing to do when you're deeply in debt is to borrow more than ever and spend your way out of trouble.

Actually that is a widely held view that forms an important basis of Keynesian economic theory. Although disputed by some this approach appears to have been helpful in recovery from several depressions and recessions.

I do not know enough if this is applicable to the current UK situation, which to me as an outsider appears to more closely represent a suicidal cult. And yes, I lurk enough on this thread to know you disagree. We will find out soon, won't we?

 

[Giordano]

Added: increased government spending to climb out of recession was employed by Obama early in his first term and the majority of the evidence is that it helped. The current expansion of the USA economy under Trump is primarily driven by an enormous increase in the deficit to power large tax cuts to the wealthy.

 

[lomiller]

When the government makes big reductions in spending, this changes both the numerator and denominator of the debt-to-GDP figure. When done at the same time as a downturn in private expenditures (both individual and corporate), this inevitably means the GDP shrinks in greater proportion.

Politicians who push this strategy are either ignorant of this reality or purposefully advocating it for their own gain.

That isn't quite how I look at it. IMO spending increase vs spending cuts are mostly a red herring.

Running a balance budget has no real impact on demand regardless of spending level, deficit spending elevates demand in the short term, running a surplus reduces demand in the short term. The end result is that deficit spending creates a short term economic boost, but doesn’t create long term growth. It doesn’t matter whether it’s in the form of tax cuts or spending increases because the same amount of money gets spent either way. In contrast running a surplus creates a short-term drag on the economy, but doesn’t hurt it long term. Again the money still gets spent so tax increases vs spending cuts doesn’t make a lot of difference.

The “catch” is that central bank rates are a much more powerful tool for stimulating and economy, or cooling an economy on the verge on inflation. It’s also a much faster acting tool. In effect, whatever fiscal policy the government peruses the central bank just overpowers it and does what’s best for the economy. Most stimulus or austerity policies are really just electioneering and political noise as far as economic growth goes.

A possible exception to this rule is when in a deflationary economy with interest rates close to zero. In cases like this the effectiveness of central bank policy is greatly reduced. The central bank may still be able to deal with it but because it needs to apply a lot more stimulus than normal to get even a small increase in economic activity there is a risk of overshooting their target and creating inflation. In this case a fiscal deficit may be a good option for can make a nice complement to monetary stimulus.

It’s not a common situation though. The 2008 recession and the immediate recovery from it may be the only time since the great depression a fiscal stimulus package was really warranted. Austerity, at a time like this was a downright bad decision since it exacerbated the problem.

 

[lomiller]

Added: increased government spending to climb out of recession was employed by Obama early in his first term and the majority of the evidence is that it helped. The current expansion of the USA economy under Trump is primarily driven by an enormous increase in the deficit to power large tax cuts to the wealthy.

Republicans blocked most of the new spending so almost all of the fiscal stimulus in the US ended up coming in the form of tax cuts, even though targeted infrastructure spending would have been more effective. Tax cuts just became more money that sat idle because business and consumers were reluctant to spend.

The result was an abnormally slow recovery. In fact US employment still has not fully recovered.

 

[Giordano]

Republicans blocked most of the new spending so almost all of the fiscal stimulus in the US ended up coming in the form of tax cuts, even though targeted infrastructure spending would have been more effective. Tax cuts just became more money that sat idle because business and consumers were reluctant to spend.

The result was an abnormally slow recovery. In fact US employment still has not fully recovered.
[qimg]http://www.internationalskeptics.com/forums/picture.php?albumid=1373&pictureid=12155[/qimg]

That is my understanding too, but I didn't wish to add "it would have been even more successful if allowed to be more fully implemented." I suspect my post will be attacked by some posters even without this speculation.

 

[Delphic Oracle]

That isn't quite how I look at it. IMO spending increase vs spending cuts are mostly a red herring.



Running a balance budget has no real impact on demand regardless of spending level, deficit spending elevates demand in the short term, running a surplus reduces demand in the short term. The end result is that deficit spending creates a short term economic boost, but doesn’t create long term growth. It doesn’t matter whether it’s in the form of tax cuts or spending increases because the same amount of money gets spent either way. In contrast running a surplus creates a short-term drag on the economy, but doesn’t hurt it long term. Again the money still gets spent so tax increases vs spending cuts doesn’t make a lot of difference.

Long-term stimulus, prevention of long-term reduction. In an "economic accounting" sense, it's tomato-tomahto.

My point was governmemt expenditures (correctly targeted, yada yada) can show a significant delta in outcomes when private spending is already slowing significantly or outright contracting.

 

[SezMe]

Would you be so considerate to explain how and why that was a "whoosh" moment? Was I perhaps responding to something that you'd actually written as a joke? Or did I miss the point of your post in some other way?

I think it all begins here:

What (credible, reasonable) grounds would they have had to disavow the referendum result?

Then in response to some questioning your post you wrote:

You don't think there's a *chance* that this was simply pre-referendum rehetoric/hectoring from a man who had long since pinned his entire political philosophy to Britain leaving the EU? I certainly don't think you can in any way take that sole quote to suggest that in the event of a narrow Remain majority there'd have been a long concerted campaign by a wide constituency of senior Leave politicians to push for a second referendum or an overturning of the first referendum result.....

which I quoted and highlighted some words:

I certainly don't think you can in any way take that sole quote to suggest that in the event of a narrow Remain majority there'd have been a long concerted campaign by a wide constituency of senior Leave politicians .....

and added some snark:

*sniff, sniff* I smell a goalpost moving.

That's all. I was calling attention to your original claim in contrast to the later changed claim. Nothing more. Your statement that I was "quite obviously referencing" something else is, to quote you, "quite obviously" wrong. In that same post you said I implied something by using the phrase "weren't going to take it sitting down" which I cannot find although it is entirely possible that I did but the search tools don't find it.

tl;dr I was ONLY calling out your goalpost moving. NOTHING more. Relax, John, we've all done it. No biggie.

 

[Darat]

Because the obvious thing to do when you're deeply in debt is to borrow more than ever and spend your way out of trouble.

Or as is often pushed by financial advisors if you can swap your interest rate from say 10% to 5% you should refinance.

ETA: And the tory governments did take the opportunity to refinance several debts so they were happy to use the idea.

 

[McHrozni]

Because the obvious thing to do when you're deeply in debt is to borrow more than ever and spend your way out of trouble.

Most of us aren't countries whose incomes depend on the overall level of economic activity. Most of us also aren't rich enough to spend enough to significantly change the overall level of economic activity.

McHrozni

 

[a_unique_person]

Brexit on 31 Jan 2020, then negotiate a trade agreement. Is that right? In other words a hard Brexit.

 

[Darat]

Brexit on 31 Jan 2020, then negotiate a trade agreement. Is that right? In other words a hard Brexit.

Not quite, Johnson has said we have to have a trade deal setup by the end of next year, when that isn't done it will be a hard Brexit.

 

[P.J. Denyer]

Or as is often pushed by financial advisors if you can swap your interest rate from say 10% to 5% you should refinance.

ETA: And the tory governments did take the opportunity to refinance several debts so they were happy to use the idea.

It's also what big business and "high value" individuals often do, for example a certain President who has come back from half a dozen bankrupcies. All borrowing is not the same, a hundred grand on your credit card is (for most of us) a huge problem, a hundred grand on a mortgage is unremarkable. If a business is borrowing to meet payroll it's a sign it's probably in trouble, borrowing for new equipment isn't.

Always painting Government borrowing as like a household borrowing to meet day to day expenses is a deliberate tactic. Of course the Conservative MP for Broxtowe did endorse the use of payday loans, so who's to say...

 

[The Don]

Not quite, Johnson has said we have to have a trade deal setup by the end of next year, when that isn't done it will be a hard Brexit.

The deal he may be going for is a hard Brexit.

There won't be time so we'll very likely have a no-deal, WTO terms, Brexit

 

[Pixel42]

Brexit on 31 Jan 2020, then negotiate a trade agreement. Is that right? In other words a hard Brexit.

Depends on the agreement. The term 'hard Brexit' is usually used to mean one which involves leaving the single market/customs union. But it's an orderly exit.

If no agreement is reached by the end of the transition period and we end up defaulting to WTO rules on 1st Jan 2021, that's called crashing out without a deal.

 

[Ulf Nereng]

I imagine that the UK will eventually, over time, negotiate deals with the EU that will end up being pretty similar to what Norway has now. No customs union and not Schengen, though, so as to appear to "respect the Will of the People". Both of the big parties will avoid any more referendums because of the way this topic causes internal strife within the parties themselves.

At least that's how it has worked out here in Norway. Neither the conservatives nor the social democrats are the least bit interested in trying another EU referendum, but both have signed up to everything that could get Norway more aligned with the EU. (Except for a customs union. That would be one bridge too far)

The difference is that Norway has oil and gas reserves and its' investment fund. (What a lucky little nation we are to have had politicians wise enough to make that fund when they could!) The UK has not been so lucky, unfortunately. I strongly suspect that they will return to being "the sick man of Europe", like they were before they joined.

 

[Nessie]

Because you don't believe it or is there a more compelling reason?

Both Ireland and Scotland have been asking the question in polls and both are within the poll margin of error.

https://en.wikipedia.org/wiki/Opinion_polling_on_Scottish_independence
https://en.wikipedia.org/wiki/United_Ireland

If all you have against this is your opinion, I'm afraid I'll have to ask for more evidence in the matter.

McHrozni

Wow! Polling regarding a united Ireland has increased dramatically towards favouring a united Ireland over the past 6 years. Another few years at that rate and there will have to be a referendum on uniting Ireland.