Sunday 17 October 2010

Economics for Sickies 3

On the Andrew Marr show this morning, George Osborne said,

"People in this country know we were on the brink of bankruptcy, 

Do they George? Really? With our own currency, an incredibly strong credit record and much of our debt held by UK investors were we REALLY George? It might also interest readers to know that the private sector are hoarding something just above £3 trillion - enough to pay the entire national debt off several times over.

Although the UK debt figure of 64% of GDP is a lot it is worth bearing in mind, that other countries have a much bigger problem. Japan for example have a National debt of 194%, Italy is over 100%.  The US national debt is close to 71% of GDP. [See other countries Debt]. Also the UK has had much higher National Debt. e.g. after the second world war it was over 180% of GDP.
As the deficit has been higher at almost every point in our history and was falling under Labour, unemployment was below the levels of the last Tory government and growth was strong, I await George's explanation of just how we were close to bankruptcy. 

If his hyperbole gets any sillier, he'll run out of adjectives!

Does it matter? Well, stock markets, business confidence and investor confidence rely on a positive outlook. If George carries on with the doom and gloom, he could just push us back into recession anyway.


  1. @Sue.........Blimey, the Coalition inherited a boom, I didn't know that, somebody should have told Liam Byrne. :-)

  2. All the deificit deniers in the world - please stand up! please stand up! (oops is it just me? :( )

  3. @√Čoin......You're just a drama queen ! :-)

  4. ken,

    Have you been barred from posting again? Drama Queen? Me? I call it mammy's boy syndrome :)

  5. "It might also interest readers to know that the private sector are hoarding something just above £3 trillion - enough to pay the entire national debt off several times over."

    Well that's an interesting way of saying that all personal worth is enough to pay of the Public Debt.

    You might equally say that my modest savings could pay half my young neighbours mortgage off.

    Where does this line of thought get us to Sue?

  6. Simply that we're not bankrupt. I didn't say they should pay it off, just that our worth balances across the sectors.

  7. Come on Colin, even you would agree that GO saying we were almost bankrupt was a bit silly!

  8. Sue - it seems that you can't get away that easily from the UKPR crowd. As you are wont to do, you have put into words my outrage at Osborne being allowed to say "on the brink of bankruptcy". Furthermore for that to be repeated at the beginning of every news on radio 4 and 5.

    I'll stand up with Eoin... there is nothing real in all of this, ideological attack on the welfare state.


  9. So glad to see you syzygy!
    It just all feels so amateurish.

  10. PS. I have been trying to post for days but Firefox wouldn't let me. I have had to go back to Safari.

  11. @Sue.............Value is relative, I started to question investment banker's marketing strategy when they started calling bundles of bad mortgages, CDOs, I must admit though, I loved it at the time and jumped in with the rest.........years of experience in the business got me out while I was still sober though.
    Your valuation is impossible because the bailiffs couldn't sell at your book value.

  12. Even half would have paid of the national debt though Ken

  13. @Suedavies18.......Hi Sue, Sue Marsh will be mortified to read your comment about, 'the UKPR' crowd, we all love her, she left because she's a control freak and wanted unrestricted recourse to our comments. :-)

  14. It doesn't feel amateurish to me ... I think it is hugely impressive... and it's great to hear what you really think without holding back.

    Your experiences with the assessment process was so vivid and frankly obscene. In your list of serious illnesses, you left out the 250K ME sufferers, who have no so-called objective diagnostic criteria because there has been no government funding for anything except psychological investigations. An evidence base only exists if someone has looked for the evidence in the first place.

  15. @Sue........I have a modest portfolio held offshore in a family trust, the bailiffs won't be gettin' it ! :-)

  16. Sue - My niece has ME!! Fancy leaving that off the list. And MS, three people I know have MS.
    I'm sure as I keep adding figures, it will become quite astounding just how many people live with and work with chronic conditions.

  17. @ Sue M - sorry crossed wires GO et al are amateurish/ your site is hugely impressive!

    @Ken - who can blame her!

  18. So that's around 100,000 people with MS too. (MS Society)
    Anyone else reading who can think of other conditions, please do contribute the stats or suggestions.

  19. Ken - Spot on! I've never liked being told what I can and can't say, lol

  20. @Sue.....What is, 'normal'? :-)

  21. @ Sue M - Well I was amazed by the numbers that you'd already collected without ME and MS, because you're right to say how few are getting benefits.

    My 3 daughters have all had ME - no.2 is still really ill after 15y.

  22. @Sue.......I had chronic condition for 13 years, it was called BGBL, (being governed by Labour). :-)

  23. Without getting too techy, I think we are on the brink of totally re-classifying illness and disease. Terms such as "cancer" and "Inflammatory illness" seem all wrong and things like IBS and ME just aren't understood, so the medical profession imply they aren't real.
    Amusing anecdote : When I was first diagnosed, it was 1989. I rushed home and checked Mum's rather old "Symptoms and Diagnoses" book. (1982) It claimed that "Crohn's was a condition of the overachiever, always reaching for the next trophy." It suggested that less stress and a nice lie down would make everything better!
    A few years later it was easier to see with imaging and the genetic links started to be understood better. Now, no-one thinks Crohn's is anything but an auto-immune condition that causes physical damage.
    Lately, they have started to classify inflammation totally differently and look at the response of the illness not the classification.
    Many auto-immune drugs are now also cancer drugs, many anti-inflammatory drugs are used to treat a wide variety of conditions.
    It's a fascinating time in medicine.

  24. Ooooh, Ken, sounds nasty, did you come out in Red spots?
    I take it the symptoms were high blood pressure, bursts of anger and irrational analysis of statistics? lol

  25. Every Wednesday I decamp from my gilded ivory tower, dahn to sarf' work with my new best friends, some of them are clients of S.L.A.M ( South London and Maudsley hospital mental health unit ) the un-initiated they appear totally,'normal', they are, except that they don't behave as, say, I would, in some circumstances. Gradually we're getting there, My son has cerebral palsy, he's a policy adviser in the DfT, we're so proud of him but he understands where he's at, and, like you Sue, deals with it. As I said, what is 'normal'.

  26. Sue.....can't make the smilies work.

  27. Quite right Ken.
    You make exactly one of the points I feel so strongly about.
    Millions of "disabled" or "ill" people work through sheer determination and will.
    Those that can't are usually so far at the bottom of the pile they deserve dignity and respect and quite a lot of extra help.

  28. Sue.....By the way, both my son's job, and the project I am involved with, are threatened by the impending cuts, as you know I blame Brown.
    My son flatly refuses to work for me, ironically, he is safer than most in his department because he ticks the extra box, his disability gives him leverage.

  29. Sue-you said "hoarded"-that is a loaded word-has connotations.

    And it doesn't "balance ".
    Private assets don't balance Government Debt.

    "Bankrupt" was the wrong word -I agree.
    It was shorthand for that which Marr didn't give him time to explain-the UK credit rating & Gilt concerns at the time of the GE.

    He feels that his Deficit reduction plan has settled those fears, and reduced Gilt yields by 1%.

    When we are headed for £1.3BILLION debt by end Parliament on GO's plan ( & obviously more under EM's) interest rates are absolutely critical.

    Government Debt interest is arounf £44 BN now-and will be over £60BN by end parliament.

    These numbers eclipse the Defence Budget-the EDucation Budget.

    People go on about the "Deficit".

    Deficits are just more DEbt.

    It is Total Cumulative Debt, and the cost of servicing it which we should talk about.

    That is the problem.

  30. But it's been a problem so many times before Colin. This deficit is not by any means the worst we've had and why shouldn't we spend our way out of it just like we did after 1945?

  31. Colin,

    You are the epitomy of dialectic thought! I am forever impressed by your effort to further understanding. From afar, it seems unrelenting. It is an admirable quality

  32. Sue, it gives me pleasure to see your brilliant new blog. On another forum, you inspired me to think about becoming politically active, join the Labour party and begin canvassing. I have also learnt from other posters of all political persuasions. Remember that just as in the other place, there are some of us who mainly lurk, in my case because I have little to add to the conversation from my own experiences, well apart from the physics...

    I have linked to your blog on my Facebook page so that friends of mine who are interested in the cuts to health and social services that are coming can follow. One of them has already given you the thumbs up.

    Please keep the words coming. Don't hold back.

  33. Sue
    I have no idea what the interest on that 1945 debt was.I have no idea how it was funded -or by whom.

    But I do know it was a different planet.

    JUst after the war-rudimentary welfare state-infrastructure to build.

    Today we have a different world-expectations of Public Services at a high level. Sovereign DEbt financed in the global financial market & so extremely sensitive to market sentiment about the status of the debt by its buyers.

    Today £50 bn of Debt interest knocks out the whole Education Budget-or requires raised taxes ( to pay debt interest !!!!) -or curtailed spending.

    Anyway-we all wheel out our favoured economist at this point.

    I'm pleased to say that my Sunday Paper ( Times) endorses GO's approach-acknowledging the risk to short term growth rates ( thats Growth still Sue !)

  34. Really Colin? The Times endorsing Osborne?
    Mr Murdoch must have had nothing to do with it.
    The Independent and the FT aren't so sure though.
    I simply can't conclude that it's OK for the markets to hold us to ransom now any more than it would have been in the 30s or 50s.
    We've been through these arguments many times, but mine take history into account and yours just seem to think this is the cusp of the first Armageddon.

  35. What a great comment Zeph. I'm delighted I inspired you to join Labour. I'm sure Colin and Ken are thrilled too, lol.
    I always liked your comments Zeph, do make them here too!

  36. This comment has been removed by the author.

  37. Despite not being convinced by their arguements, I feel that their contributions are valuable all the same.

    I'm amused by your sparring with Colin on these pages. I'm glad that he keeps posting, even if he does so often get beaten up by the reds. I hope that your site will help to spread the message about the historical significance of the relative size of the deficit - this will help to inform about the motivation for the government's course of action - economic or idealogical.

    Ken is new to me, but I'm glad to see another friendly poster. I don't remember him from the other place but gather that he has recently begun posting again after "exile" whatever that means. Maybe he just isn't as knowledgeable as you are with the automoderation blue words?

    At least you don't have to worry about moderation now.

  38. Ken's a lot like Roland, but naughtier.
    As you can see he can be very clever too!
    He convinced me to stick with FPTP actually, long before the coalition was formed.
    Colin's the only Blue I've ever known on these sites to make a totally thought out argument for Cameron.

  39. Sue

    The Sunday Times comment was taken from an analytical piece by it's regular economist.
    It was not simply a "leader" approval.
    It was an examination of the issues. One could of course disagree-but it would have to be on the basis of the argument-not the proprietor's name.

    I don't think we are on the cusp of Armaggedon.
    But I do think it is serious.

    The thing about the deficit deniers ( hate that term-but its good shorthand) which amuses me is this :-

    With Credit Card debt-particularly high debt, there seem to me to be two approaches:-

    In one case , the debtor concentrates on the monthly repayment-how much can I "afford". This approach is mirrored in those TV adverts which say they can reduce your monthly "outgoings" -as though by magic-without mentioning the term.

    In the other case, the debtor concentrates on the monthly interest charge , and makes repayments which reduce it as quickly as possible.

    In case 1-the debtor never considers the real cost to him of the debt-the monthly interest charge. It is as though the monthly CC repayment is a permanent feature of his/her budget.

    In case 2-the debtor always considers the real cost to him -the interest charge which the CC company adds each month to the stuff he/she has bought.

    Deficit deniers fall into the first category I think ;-)

  40. Look Colin, I would not dream of trying to convince you that The Guardian's economist is totally un-biased.
    You're an intelligent guy - When, first The Times, then The Sun came out in favour of Coulson last week, it wasn't coincidence.
    The Tory business leaders writing to the Torygraph today supporting Tory cuts are no surprise are they?
    You're attempt to compare the UK debt to a personal credit card holder is even worse.
    Nearly ALL economies have debt, nearly all a deficit - they treat it as a mortgage, not a credit card.
    The deficit was between 30% and 40% of GDP before all this started and a Tory Gov were quite happy about it. By that measure, reducing the deficit by half is more than adequate, the rest is just slash and burn.
    When did debt start to bother you so much? When it became Labour debt apparently.

  41. I would have a lot more respect for your position if it didn't always stick so closely to the Cameron line - even through u-turns.
    If you can't acknowledge the potential pitfalls to GOs approach, despite all of Alec's brilliant posts on the subject (and non-partisan at that)
    how can I be reassured?
    An apparent 18 BILLION off welfare
    NHS to shrink by 1 5th
    What should lead me to believe this is anything but ideological?

  42. Good morning Sue, do you know why bankers never look out of the window in the morning ? Because it leaves them nothing to do in the afternoon.
    Anyway, back to your discussion with Colin, up-thread. The often used argument against irresponsible borrowing, credit card vs mortgage, does have traction, since the connection is that they were both introduced by moneylenders to the same end, ie., making personal gain. The money lenders turned into banks and looked for more opportunities to exploit their position........the obvious connection was with government, hence the close relationship between the banks and the treasury, this relationship ultimately created the establishment, which then sold us the argument that governments need to borrow. Don't tell Islamic governments that it's necessary for debt to control the world though, they don't believe in the original idea, that people should be exploited for profit. That is where I depart from Islam, although I do appreciate their superior morality....I am an engineer by training and a banker by accident. :-)

  43. I wasn't really seeking your respect Sue.

    I dealt with the U turn thing on UKPR.

    The June Budget DEficit reduction plan conforms to the Conservative Manifesto.

    I have already acknowledged that growth will be inhibited for the first year so of fiscal tightening.

    Anyway-we always get to this point I guess.

    I have no idea what "spend our way out of recession " means-or the slightest concept of how you would deal with the Public Finances problem.

    However, the Labour opposition is to tell us what it's position is soon-& that's what matters.

  44. "When did debt start to bother you so much? When it became Labour debt apparently."

    I can get that sort of comment on UKPR all day.

    Deja view then.

    Ah well.

    By Sue & good luck.

  45. @Sue........My previous comment was written during a train journey and I was rushing. The bottom line was, governments, of any stripe, don't need to run deficits, they choose to. :-)