Will Clegg have the bottle

[Last of the Fraggles]

In the event that did not happen and I have to wonder what actually went on. I find it difficult to believe that voters are happy with either of the main parties: they did not give either of them a mandate. It seems to me they may have been looking for a real change but that was not on offer: the lib dems are not so different from the other two and this is shown by the fact that they are seen to be capable of making a deal with either. No other party had any chance of forming a government and people do not vote in numbers for no-hopers (as the lib dems have often pointed out): so perhaps the lib dems were not percieved to have a real chance. If so then the media is not as powerful as it supposes, and I feared.

I think what happened is that a lot of people were fairly impressed with Clegg and his policies and more importantly the thought that he was a change from the 'same old 2'. However I think the big 2 and the press did a good job of convincing middle of the road voters that if you vote lib dem you will get 'the one you don't want'. I'm sure in Scotland people simply got scared of the prospect of voting Lib Dem and getting a Tory government. I'm equally sure in more blue areas people feared letting Labout sneak in. Old habits die hard and until we get a PR system the Lib dems will never make significant gains.

 

[Fiona]

The bank is in this case is anyone with a pension fund and the like. UK goverment bonds are the kind of traditional safe investment that anyone with some level of savings is going to have ended up investing in.

Certainly

Nope. The Sovereign bond market isn't greatly impacted by regulation or the lack of it.

That does not seem to me to be true. There was a "bonfire of the regulations" on the grounds that those regulations inihibited the free flow of capital and hampered the growth of prosperity. This freed the banks to indulge in increasingly dodgy trading for short term gain (as you would expect). The underlying ideology is odd: it was argued that tight control of the money supply (to ensure that inflation was not a problem) was all that governments were required to do to ensure that the market would make the best decisions: but in practice it tied the hands of government (which may or may not have been a good idea) and it passed control of the money supply into private hands: which promptly increased it by a huge amount and with no concern for the wider or the long term picture. It is interesting that this did indeed lead to inflation: though it is not called inflation when it applies to house prices in the domestic sphere, nor when it is applied to the financial sector. Then it is "what the market will bear" and the influence of the money supply is ignored, so far as I can see. This in turn led to a crisis in the world financial markets and those countries which bought most heavily into this ideology appear to have sufffered the worst consequences. Those consequences are real and so there is a problem with the bond markets: the influence of regulation is indirect but it is real. It is the same in the domestic sphere: they abolished credit control and limits on mortgages, as a matter of government regulation. The story was that this was the "nanny state" and that people would choose for themselves how much debt they could sustain. Turns out people are still not very good at making that judgement and they are far more heavily indebted than is sensible given the problems we now face. When that happens companies will not extend any more credit: and as in the domestic sphere, so in the bond market.

No degree of regulation is going to impact the Sovereign bond market. You can't force people to buy things or stop selling them.

See above.

You are suggesting we go to the IMF again?

Whatever makes you think that? as I said we are going to have to sort this out and we don't have many options. My concern is the underlying problem which predictably resulted in this mess and how we prevent it from happening in the future. It is no good paying off the deficit and then waiting for the same thing to happen again because we have not reversed these policies

Not really. At the moment we still have a pretty good chance of making a profit out of the bailout.

Perhaps we will. I do not see how we will, though: Either the banks will return to profit while under public control or they won't. If they do then the plan is we sell them back. Why would they command a proper price? The track record on selling public assets has not been very good in that respect, I seem to recall. And if they perform well with a large public stake that is not a very good message from the perspective of free marketeers. I doubt they will wish to pay true value. They might want a stake in a well functioning bank: or they might not bother and stick with the ones they have. I don't know how they will make that calculation but it will not be on the basis purely of profit, though that is what we are asked to believe. I hope you are right: but I do not think it is by any means certain.

Of course we could default on our bonds but 1) I assume you don't have a pension and 2)we would need to cut goverment spending by 159.2 billion the day after and/or have to deal with hyperinflation.

I did not suggest any such thing. But what you seem to me to be missing is the fact that we already have unacceptable inflation and that is the root of this problem: calling it by another name does not change the fact. The financial instruments (and houses) were not at a price which represented any underlying value. Too much money (credit) chasing too few goods is what we have seen: and that is the definition of inflation is it not?

 

[geni]

That does not seem to me to be true. There was a "bonfire of the regulations" on the grounds that those regulations inihibited the free flow of capital and hampered the growth of prosperity. This freed the banks to indulge in increasingly dodgy trading for short term gain (as you would expect).

Which has no impact on the sovereign bond market. The sovereign bond market (at least in UK goverment bond)is slow not particulary liquid and of little interest to those looking to make short term gains.

The reason it presents us with a problem we can't ignore is not because of complex tradeing issues but because people might decide to stop lending us money. You can't force people to lend you money (except under some very limited conditions) without triggering hyperinflation as people get the heck out of the pound.

Whatever makes you think that? as I said we are going to have to sort this out and we don't have many options. My concern is the underlying problem which predictably resulted in this mess and how we prevent it from happening in the future. It is no good paying off the deficit and then waiting for the same thing to happen again because we have not reversed these policies

Last time we sidesteped the sovereign bond market we went to the IMF

Perhaps we will. I do not see how we will, though: Either the banks will return to profit while under public control or they won't. If they do then the plan is we sell them back. Why would they command a proper price? The track record on selling public assets has not been very good in that respect, I seem to recall. And if they perform well with a large public stake that is not a very good message from the perspective of free marketeers. I doubt they will wish to pay true value. They might want a stake in a well functioning bank: or they might not bother and stick with the ones they have. I don't know how they will make that calculation but it will not be on the basis purely of profit, though that is what we are asked to believe. I hope you are right: but I do not think it is by any means certain.

Our biggest stake in the banks is the LLoyds-RBS thing. There is still a fair chunk of that in private ownwership and the goverment has taken a hands off aproach. Selling it onto the open market should be trivial.

I did not suggest any such thing.

Then you have to consider the markets.

 

[Fiona]

We are talking at cross purposes geni. I presume that you agree that willingness to lend rests on perception of ability to pay?

 

[geni]

We are talking at cross purposes geni. I presume that you agree that willingness to lend rests on perception of ability to pay?

There are some other factors but in the case of the sovereign bond market pretty much.

 

[Fiona]

Ok. Do you accept that the problems in the financial markets have had an impact on the (perceived/actual) ability of several coutries to pay?

 

[geni]

Ok. Do you accept that the problems in the financial markets have had an impact on the (perceived/actual) ability of several coutries to pay?

It doesn't appear so. Greece has issues going back perhaps decades. Spain and ROI had housing price crashes which kinda took out their economies. For the most part the markets seem to assume that goverments will get most of their bailout moneys back and are dissregarding it.

 

[Fiona]

ok. So from your perspective no part of this problem relates to the global financial crisis. What, then, do you think has caused the problem?

 

[geni]

ok. So from your perspective no part of this problem relates to the global financial crisis. What, then, do you think has caused the problem?

Goverments overspending for some years (Classic keynesian economics says thay should have been breaking even running a surplus). Some get hit by their local economic bubble bursting others get hit by time running out. Worries over greeece make those who invest in sovereign bonds do a risk recalculation.

 

[Fiona]

Goverments overspending for some years (Classic keynesian economics says thay should have been breaking even running a surplus). Some get hit by their local economic bubble bursting others get hit by time running out. Worries over greeece make those who invest in sovereign bonds do a risk recalculation.

Ok. It is true that on a keynsian model it is not usual to run a deficit in good times: but then one has to ask whether these were good times and if so in what terms. I personally do not see the uk government was overspending because it seems clear to me that public service was significantly underfunded for many years. I do think they were undertaxing and that was part of the problem with the ideology which held that low tax led to increased prosperity which would then spread and allow us to have the kind of society we clearly value. That is not tenable and is obviously not tenable.

But the fact remains that we have not been spending nor running a deficit which is out of line with the range which has been the norm since the middle of the last century. That has only happened since the financial crisis And it seems to me that the loss of the already inadequate tax revenue is directly related to the failure of credit attendant on that global crisis.

Do you accept that the squeeze on credit has led to business failures and to job losses? Do you accept that our dependence on financial services rather than on manufacturing has meant that we have been worse placed to deal with this than other countries which did not buy the idea that they could continue to prosper on the basis of service industries?

 

[geni]

Ok. It is true that on a keynsian model it is not usual to run a deficit in good times: but then one has to ask whether these were good times and if so in what terms. I personally do not see the uk government was overspending because it seems clear to me that public service was significantly underfunded for many years. I do think they were undertaxing and that was part of the problem with the ideology which held that low tax led to increased prosperity which would then spread and allow us to have the kind of society we clearly value. That is not tenable and is obviously not tenable.

The reasons that expenditure eceeded tax take are unimportant in deciding what to do now.

But the fact remains that we have not been spending nor running a deficit which is out of line with the range which has been the norm since the middle of the last century. That has only happened since the financial crisis And it seems to me that the loss of the already inadequate tax revenue is directly related to the failure of credit attendant on that global crisis.

We were running up a deficit in a time of economic growth. Economic growth always halts from time to time. The reasons are fundimentaly unimportant.

Do you accept that the squeeze on credit has led to business failures and to job losses?

Yes but you can't reasonably regulate banks to force them to lend without causing all sorts of problems.

Do you accept that our dependence on financial services rather than on manufacturing has meant that we have been worse placed to deal with this than other countries which did not buy the idea that they could continue to prosper on the basis of service industries?

Strangely not really. As germany found out being an export lead manufactor doesn't do you the slightest good if no one is buying anything.

 

[Reginald]

There could be a very clever ploy going on here.

Given that these are just the type of negotiations that would happen in a parliament chosen by PR (well in many cases), although currently in a much reduced time frame, the markets, it's the markets!!.....the whole negotiation starts to look ponderous and slow. (Which again really does not compared to other countries that take weeks to hammer out agreements ).

So It's in Cameron's best interest to make this look as cumbersome, secretive and as ridiculous as possible. (I refer here to the secretive way both parties alluded to their leaders leaving for home yet in reality they crept off to have a meeting. Why? Apart from the obvious public school hilarity and giggles, there was no point in keeping that secret at all, we know they are negotiating, how bad does this make the process look?)

By the very nature of the process (or rather the way it is being done in this specific case), the whole consensual government thing may quickly lose appeal.

 

[Rolfe]

Dunno. Look at this alternative view. (I posted something similar in the West Lothian Question thread.)

Here's the outcome for Great Britain, split between the three countries.

|England|Wales|Scotland
Conservative| 268| 8| 1
Labour| 191| 26| 41
LibDem| 43| 3| 11
Other| 1| 3| 6

If anything other than a Conservative minority government or a Conservative/LibDem coalition comes out of this, how is England going to react to having (in effect) the Labour government they rejected foisted on them by way of the fact that Scotland and Wales voted Labour? If you take England alone, the Tories have a perfectly respectable working majority.

Remember, Scotland and Wales have their own parliaments. England doesn't. Westminster acts as the English parliament for English domestic affairs. This could go down like a lead balloon.

Rolfe.

 

[Delscottio]

Rolfe, are the Welsh figures for Con and Lab mixed up?

 

[Rolfe]

Yes they are, sorry. (The BBC page puts the biggest party on top but I didn't notice till I got to Scotland.) Changes my argument quite a bit (though not fundamentally), so I'll edit the post now.

Thanks for spotting that. I read too much about Wales "voting like England and not rejecting the Tories"!

Rolfe.

 

[Lothian]

Dunno. Look at this alternative view. (I posted something similar in the West Lothian Question thread.)

Here's the outcome for Great Britain, split between the three countries.

|England|Wales|Scotland
Conservative| 268| 8| 1
Labour| 191| 26| 41
LibDem| 43| 3| 11
Other| 1| 3| 6

If anything other than a Conservative minority government or a Conservative/LibDem coalition comes out of this, how are England and Wales going to react to getting (in effect) the Labour government they rejected put back in power solely because Scotland voted Labour?

England in particular, because don't forget, England doesn't have its own parliament and so Westminster functions as the English parliament for English domestic matters. It would go down like a lead balloon.

Rolfe.

Of course your figures are only really relevant if you consider that everyone in a constituency supports the winner. In reality many people with a Tory MP would be delighted with a Labour Government. If you are to ask the question as to how people will feel with a Labour government again you need to look at people not MPs.

The Tories got a little under 10 million votes in England. Labour a little over 7 and the Lib Dems a little over 6. With just over 25 million voting in England a Lib/Lab pact would have the support of well over half* the electorate.



* assuming tactical voting is self cancelling.

 

[Rolfe]

Would you mind editing or removing that quote? (I was afraid that might happen - I edited out the mistake Delscottio pointed out, but you quoted me before I finished.)

You are making an argument for PR. Arguments for PR are good. However, we do not have PR, and I don't believe it's politic for people now to demand that we should behave as if we do. If we want PR, we need to legislate for PR.

Rolfe.

 

[Delscottio]

Would you mind editing or removing that quote? (I was afraid that might happen - I edited out the mistake Delscottio pointed out, but you quoted me before I finished.)

You are making an argument for PR. Arguments for PR are good. However, we do not have PR, and I don't believe it's politic for people now to demand that we should behave as if we do. If we want PR, we need to legislate for PR.

Rolfe.

I happen to agree, however the Tories have already talked about the having the popular vote so it's fair game in some respects.

 

[Delscottio]

Forgot to add, in all of this the Tories still only managed to attract 3.8% more votes across the board, hardly a ringing endoresment of them either. In some ways they've had the biggest mare in all this.

 

[Lothian]

Would you mind editing or removing that quote? (I was afraid that might happen - I edited out the mistake Delscottio pointed out, but you quoted me before I finished.)

You are making an argument for PR. Arguments for PR are good. However, we do not have PR, and I don't believe it's politic for people now to demand that we should behave as if we do. If we want PR, we need to legislate for PR.

Rolfe.

Done.

I wasn't making a pro PR argument I was responding to your question about how people would react. 7 million people in England would be delighted with Labour sharing the power.