Jump to content
Cold?
Local
Radar
Snow?

World Economy


Recommended Posts

Posted
  • Location: Beccles, Suffolk.
  • Weather Preferences: Thunder, snow, heat, sunshine...
  • Location: Beccles, Suffolk.

    How can everyone be in debt, at the same time? http://nwstatic.co.uk/forum/public/style_emoticons/<#EMO_DIR#>/unsure.gif

    Link to post
    Share on other sites
    Spotted a post you think may be an issue? Please help the team by reporting it.
    • Replies 1.4k
    • Created
    • Last Reply

    Top Posters In This Topic

    Top Posters In This Topic

    Popular Posts

    As harve has touched on, re inflation and interest rates, its a hell of complicated set up to understand correctly (nobody does imho), the news always presents it very clean, simplistically and wrong.

    Go Greek strikes Go.... It's not often I support strikes, but in this I do. They are absolutely right that Greece does not need more lending. It can't afford what it owes full stop, they still need t

    Afraid not, old bean; China has been a Communist People's Republic since, when, 1947? Just because it's a Tory government that's doing all the kow-towing makes not a jot of difference...But I bet that

    Posted Images

    Posted
  • Location: Liverpool
  • Location: Liverpool

    Interesting comment from the thread of the Craig Murray article:-

    It is an interesting comment, but do you not think the energy use will level off before then? I believe a lot of the increase is due to the increase in people who are 'middle class' in developing countries, and also from the growing population. Eventually the population will reach an equilibrium, and energy usage will peak.

    Link to post
    Share on other sites
    Posted
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'

    A simplistic but clear view of where we are:

    We've hit our credit limit By Mark Dampier (Hargreaves Lansdown)| Thu 28 July 2011

    The Western world has been on a borrowing binge for at least 15 years. Unfortunately, governments of all persuasions have confused this borrowing with genuine economic improvement, and seem convinced their policies have driven economic growth.

    I believe nothing could be further from the truth - governments are, and have always been, very poor spenders of our money. The financial crisis (which in my view is still continuing) has brought these problems to the fore. The boom in public and consumer spending is over - according to Richard Jeffrey of Cazenove our spending is on track to show a decline of around 0.8% in real terms.

    Governments on both sides of the Atlantic have tried to counteract these problems by inducing consumers to spend more. In my opinion these policies have been totally counterproductive. Borrowing more to spend our way out of a recession will only postpone the painful but necessary process of reducing our debt levels.

    The trouble is that the public in most countries have become accustomed to unsustainable levels of benefits and government spending, and understandably don't like the idea of having less. We can see this demonstrated spectacularly in Greece and, to a lesser extent, in the rows over public sector pensions and benefit cuts in this country.

    The problem is that politicians in my view are only really interested in the electoral cycle, and "save more and spend less" isn't a vote winner. Unfortunately, however, just like the person who has maxed out his credit cards, the only way to recover is to give up some of the things we like and slowly pay back our debts.

    This will take a long time, and whilst it is happening, consumer spending is likely to remain weak and growth anaemic. Not a winning electoral message but realistic all the same.

    • Like 1
    Link to post
    Share on other sites
    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    A simplistic but clear view of where we are:

    We've hit our credit limit By Mark Dampier (Hargreaves Lansdown)| Thu 28 July 2011

    The Western world has been on a borrowing binge for at least 15 years. Unfortunately, governments of all persuasions have confused this borrowing with genuine economic improvement, and seem convinced their policies have driven economic growth.

    I believe nothing could be further from the truth - governments are, and have always been, very poor spenders of our money. The financial crisis (which in my view is still continuing) has brought these problems to the fore. The boom in public and consumer spending is over - according to Richard Jeffrey of Cazenove our spending is on track to show a decline of around 0.8% in real terms.

    Governments on both sides of the Atlantic have tried to counteract these problems by inducing consumers to spend more. In my opinion these policies have been totally counterproductive. Borrowing more to spend our way out of a recession will only postpone the painful but necessary process of reducing our debt levels.

    The trouble is that the public in most countries have become accustomed to unsustainable levels of benefits and government spending, and understandably don't like the idea of having less. We can see this demonstrated spectacularly in Greece and, to a lesser extent, in the rows over public sector pensions and benefit cuts in this country.

    The problem is that politicians in my view are only really interested in the electoral cycle, and "save more and spend less" isn't a vote winner. Unfortunately, however, just like the person who has maxed out his credit cards, the only way to recover is to give up some of the things we like and slowly pay back our debts.

    This will take a long time, and whilst it is happening, consumer spending is likely to remain weak and growth anaemic. Not a winning electoral message but realistic all the same.

    Thanks for this kar999 ....somone speaking sense for once!!

    unfortunately very few are willing to wake up and smell the coffee.

    Link to post
    Share on other sites
    Posted
  • Location: Beccles, Suffolk.
  • Weather Preferences: Thunder, snow, heat, sunshine...
  • Location: Beccles, Suffolk.

    I'm still confused, kar...If I borrow a fiver off you, then only I am in debt, surely?

    What gets me about all this economic stuff, is that large amounts of money seem to have either vanished into thin air (Or into the Cayman Islands?), or never to have existed in the first place? Are the humongous sums involved any more than the musings of financial whiz-kids?

    I'm smelling bankers' malfeasance again here, I'm afraid...I'm a banker and I like to bank. I bank all night and I... :D

    Link to post
    Share on other sites
    Posted
  • Location: Near Lauder, SE Scotland, 175 m asl
  • Location: Near Lauder, SE Scotland, 175 m asl

    I'm still confused, kar...If I borrow a fiver off you, then only I am in debt, surely?

    What gets me about all this economic stuff, is that large amounts of money seem to have either vanished into thin air (Or into the Cayman Islands?), or never to have existed in the first place? Are the humongous sums involved any more than the musings of financial whiz-kids?

    I'm smelling bankers' malfeasance again here, I'm afraid...I'm a banker and I like to bank. I bank all night and I... :D

    Oh the money does belong to someone; these being countries and individual investors; some of whom are very weathly as a result. It is the interest charged on loans that is primarily creating non-existent money, that and when money is not spent on tangible things such as important infrastructure. It's bad news when you're borrowing from Peter to pay Paul.

    Edited by scottish skier
    Link to post
    Share on other sites

    I still think that Mr Macawber's philosophy holds good -

    Annual Income £20 - Annual Expenditure £19/19/6d - result - happiness

    Annual Income £20 - Annual Expenditure £20/00/6d - result - misery

    In short we can't spend more than what we earn but this is something which governments have been doing for donkeys' years; not only spending it but wasting it though top heavy bureaucratic institutions. I am sure that if the powers that be were having to spend the money out of their own pockets instead of what they imagine to be a bottomless pit of the taxpayers they would never have done this.

    Now realising the mess we are in they are trying to get it back and this has resulted in all manner of restrictions which are resulting in an extremely pedestrian recovery.

    Some of the overheads are being cut down but at the same time we need to earn a few bob, so we are better placed to pay our way. This will not be done by the high levels of taxation which tend to stifle growth and the economy.

    Interestingly it has been shown that paradoxically that a lowering of taxation actually increases the amount going into the treasury's coffers. Mainly by it being not so important to evade or avoid taxes or to move assets overseas, people do not go to the same lengths to do this. The low paid have more incentive to work rather than live off the state because it becomes more profitable and they are better off thus becoming contributors instead of takers from the system. Lower taxes on businesses means that more companies from overseas would be prepared to set up business in this country rather than go elsewhere, so not only will the treasury gain from the company taxes it will get more of a slice from the workers paying income tax etc. In turn the workers will have more disposable income and will be able to spend more, therefore more receipts in VAT.

    To me all this appears to be plain straightforward common sense yet the likes of Gordon Brown with their all singing all dancing degrees in economics etc never seem to grasp this.

    Link to post
    Share on other sites
    Posted
  • Location: Dorset
  • Location: Dorset

    I'm still confused, kar...If I borrow a fiver off you, then only I am in debt, surely?

    What gets me about all this economic stuff, is that large amounts of money seem to have either vanished into thin air (Or into the Cayman Islands?), or never to have existed in the first place? Are the humongous sums involved any more than the musings of financial whiz-kids?

    I'm smelling bankers' malfeasance again here, I'm afraid...I'm a banker and I like to bank. I bank all night and I... :D

    I think it's just very complicated Pete. I said to PP that their are various different types of debt, if we take government debt as an example, I wrote a post a while ago about structural and cyclical debt, but you also have debt profiles i.e the maturity of the debt, the UK probably has the best debt profile in the world with the length of it's bonds exceeding 10 years, in the US this is around 7 years and for Germany 5-6 years, this means that most of the debt will not have to be refinanced during a cyclical recession and is a great strength. Greece, Spain etc on the other hand has a profile of debt extending mostly to 18-24 months, this means they must refinance all of the government debt every 2 years, if the world economy goes pear shaped then the interest on their entire govt. debt will be badly hit i.e payments increasing from 5% to 15% very quickly. This is impossible for the UK.

    As well as this you have the profile of the buyers of the debt. Again for example in Japan they have lots of govt debt will a lowish maturity profile, however most of the buyers are the Japanese themselves (they alone have 4 trillion Dollars of savings). The UK is pretty reliant on international markets for it's debt, which is why they need to please them so much. Some countries such as Spain, Greece have the worst of all worlds to it's no surprise they are under pressure now, Some like the UK/US/Japan have some faults, but some saving graces as well.

    Probably the most important factor is not the indebtedness of the government but of the Country on those standards things are not anyway near as bad as the government debt figures of 95% (i.e 95% of governments are in debt) lots of countries have savings and on the whole the savings cancel out the debts will a bit to spare.

    Link to post
    Share on other sites
    Posted
  • Location: Near Lauder, SE Scotland, 175 m asl
  • Location: Near Lauder, SE Scotland, 175 m asl

    Interestingly it has been shown that paradoxically that a lowering of taxation actually increases the amount going into the treasury's coffers.

    I've always been somewhat confused over this idea and whether it works in practice. The argument has sense behind it, yet in practice it does not seem to be the case? Take a look at the USA, some of the lowest taxes in the western world yet huge debts and no sign of supposed strong growth getting them out of it anytime soon.

    With anything, it seems to be getting the balance right; very high taxes are just as bad as very low taxes surely? In the end, the less tax we pay, the more the power of the vote is eroded as it increasingly influences less (public services etc). Of course, if we pay huge taxes and the state dominates, then again we can lose choice/freedoms to an extent.

    Posted Image

    Link to post
    Share on other sites
    Posted
  • Location: Huddersfield, 145m ASL
  • Weather Preferences: Lots of snow, lots of hot sun
  • Location: Huddersfield, 145m ASL

    It is an interesting comment, but do you not think the energy use will level off before then? I believe a lot of the increase is due to the increase in people who are 'middle class' in developing countries, and also from the growing population. Eventually the population will reach an equilibrium, and energy usage will peak.

    But that's the problem, current economic policy (dogma) does not allow for this, it is entirely based on the idea that economic (and by association national) success is based on growth, whether that be increased profits year on year in the private sector or 'good' growth and/or GDP figures for countries. And the last four or five posts above are still entrenched within this blinkered framework - it's a lovely simplistic simple thing to say governments 'can't spend money they don't have', and seems eminently sensible. However, it's a house of cards - governments reduce spending, consumer spending reduces as a consequence, (either directly through reduced social benefits and increased taxes, or indirectly as private companies whose main customers were in the public sector contract), private companies are hit by this reduction in consumer spending and contract, consumer spending is then further affected, as are the huge company-company markets, profits fall, stock markets take fright, confidence falls, tax take falls (both from individuals and from corporate taxation) so keeping within the 'you can't spend what you don't have' mantra, government spending must further fall, and the downward cycle intensifies.......... (for further details see The Great Depression)

    This is why the whole thing needs to be radically overhauled, and this actually has to start in the private arena at the same time as the public one. For example, I notice BSkyB announced profits of over £1bn today, Starbucks has reported a 30%+ rise in annual profits in the last few days, Shell have just reported profits of $8bn for a three month period !!!, Centrica have reported £1.3 bn profit for the first six months of 2011, and so on and so forth. This simply cannot continue because these huge profits are not sustainable over any long term (see my post above for why), and much of this money is being taken out of countries' economies but hardly any of it is being reinvested there, either directly through corporate taxation or indirectly through inward investment. These ridiculous levels of profit do not actually benefit anyone, and unless something is done to rectify these insane imbalances by more effectively redistributing what wealth there is, it's pointless talking about 'controlling public spending', because the likely consequences are not going to be 'a bit of pain felt by everyone' (everyone, haha, that's a separate joke of course.......), but a drastic and extremely painful dramatic 'readjustment' which, for any compassionate humane person, does not bear thinking about.

    • Like 1
    Link to post
    Share on other sites
    Posted
  • Location: Near Lauder, SE Scotland, 175 m asl
  • Location: Near Lauder, SE Scotland, 175 m asl

    Related to my earlier post re US growth:

    http://www.bbc.co.uk/news/business-14344671

    US economy: GDP growth slows to 1.3%

    The US economy grew at an annualised rate of 1.3% in the second quarter, much slower than had been expected.

    Link to post
    Share on other sites
    Posted
  • Location: 4 miles north of Durham City
  • Location: 4 miles north of Durham City

    But that's the problem, current economic policy (dogma) does not allow for this, it is entirely based on the idea that economic (and by association national) success is based on growth, whether that be increased profits year on year in the private sector or 'good' growth and/or GDP figures for countries. And the last four or five posts above are still entrenched within this blinkered framework - it's a lovely simplistic simple thing to say governments 'can't spend money they don't have', and seems eminently sensible. However, it's a house of cards - governments reduce spending, consumer spending reduces as a consequence, (either directly through reduced social benefits and increased taxes, or indirectly as private companies whose main customers were in the public sector contract), private companies are hit by this reduction in consumer spending and contract, consumer spending is then further affected, as are the huge company-company markets, profits fall, stock markets take fright, confidence falls, tax take falls (both from individuals and from corporate taxation) so keeping within the 'you can't spend what you don't have' mantra, government spending must further fall, and the downward cycle intensifies.......... (for further details see The Great Depression)

    This is why the whole thing needs to be radically overhauled, and this actually has to start in the private arena at the same time as the public one. For example, I notice BSkyB announced profits of over £1bn today, Starbucks has reported a 30%+ rise in annual profits in the last few days, Shell have just reported profits of $8bn for a three month period !!!, Centrica have reported £1.3 bn profit for the first six months of 2011, and so on and so forth. This simply cannot continue because these huge profits are not sustainable over any long term (see my post above for why), and much of this money is being taken out of countries' economies but hardly any of it is being reinvested there, either directly through corporate taxation or indirectly through inward investment. These ridiculous levels of profit do not actually benefit anyone, and unless something is done to rectify these insane imbalances by more effectively redistributing what wealth there is, it's pointless talking about 'controlling public spending', because the likely consequences are not going to be 'a bit of pain felt by everyone' (everyone, haha, that's a separate joke of course.......), but a drastic and extremely painful dramatic 'readjustment' which, for any compassionate humane person, does not bear thinking about.

    Well said.

    Link to post
    Share on other sites

    I've always been somewhat confused over this idea and whether it works in practice. The argument has sense behind it, yet in practice it does not seem to be the case? Take a look at the USA, some of the lowest taxes in the western world yet huge debts and no sign of supposed strong growth getting them out of it anytime soon.

    With anything, it seems to be getting the balance right; very high taxes are just as bad as very low taxes surely? In the end, the less tax we pay, the more the power of the vote is eroded as it increasingly influences less (public services etc). Of course, if we pay huge taxes and the state dominates, then again we can lose choice/freedoms to an extent.

    Posted Image

    You are right in saying that a correct balance must be maintained - I think the problem in America is that whichever government or President introduces significantly higher taxes are likely to be voted out of office in the following election and since none are wishing to commit political suicide, so the other extreme of low taxes is maintained. Ideally income should balance expenditure and for this to be continually out of balance is not sustainable and a country could end up spending a large proportion of its income just on servicing its debts - but at sometime or other they will have to bite the bullet.

    If my memory serves me correctly the idea of low taxes paradoxically boosting revenue has been done by one or more of the Baltic States and it appeared to work and it would seem that Putin did the same with the Russian economy - extract from wilkipedia below:

    Putin is credited with bringing political stability and re-establishing the rule of law.[2] During his presidency, Russia's economy bounced back from crisis, seeing GDP increase by 72% in PPP (sixfold in nominal),[3][4] poverty decrease by more than 50%,[5][6][7] and average monthly salaries increase from $80 to $640.[3][8][9] These achievements were ascribed to strong macroeconomic management, important fiscal policy reforms and a confluence of high oil prices, surging capital inflows and access to low-cost external financing,[10] and were described as impressive by analysts.[11][12]

    During his presidency, Putin passed into law a series of fundamental reforms, including a flat income tax of 13%, a reduced profits tax, and new land and legal codes.

    Looking through various articles on various sites opinion re lower taxes = more revenue and vice versa is divided and I would suggest that it depends very much on the country and its circumstances.

    As far as the UK is concerned my feeling is that we are still over taxed, though Osborne did go some way towards alleviating this in the last budget, though it will be some time before any real benefits kick in and what we probably need in the autumn is a reduction in VAT and a further lowering of corporation tax, with some incentives to increase R & D to get things moving again.

    Link to post
    Share on other sites
    Posted
  • Location: 4 miles north of Durham City
  • Location: 4 miles north of Durham City

    "I wish it were possible to obtain a single amendment to our Constitution.....Taking from the federal government the power of borrowing" - Thomas Jefferson

    Link to post
    Share on other sites
    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    So.....looks as though the deal to raise the US debt ceiling will finally pass through the senate today. Nice when you can up the limit on your credit card to $16.7 trillion!! AAA???

    Clearly the US needs to raise taxes and lower its standard of living massively. At the moment 40c of every dollar they spend is borrowed! Clearly this is not sustainable and the cuts proposed in the debt deal will do sod all to put this right.

    This deal is surely just a blip on the US's (and the rest of the western worlds) path to financial armageddon! Or am I missing the point??!

    Link to post
    Share on other sites
    Posted
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'

    Here come the printing presses again...

    10 year bond yields are back to where they were when the Federal Reserve began its second round of asset purchases and now, once again, there is talk of another such round, QE-III as some might call it. One cannot be certain, but there is certainly 'market chatter' in this regard, on newswires, in newspapers, etc,...

    Or rather they'd cast new coins... they already considered the idea a few days ago.. :whistling:

    The Federal Reserve was reported to be preparing guidance for banks in the event that the ceiling is not lifted by the deadline.

    Amid the political hiatus, increasingly hair-brained schemes were being proposed, including the printing of a $1 trillion dollar coin. Laws limit the printing of notes in the US but not coins, according to Yale Law School professor Jack Balkin, who proposed the plan.

    Edited by kar999
    Link to post
    Share on other sites
    Posted
  • Location: Chevening Kent
  • Location: Chevening Kent

    Gold smashed the £1000 level yesterday now standing at £1015 per oz just off its all time high of nearly £1020 per oz.

    The US problems stem from M3 money supply after 9/11 and Bush's decision to just print more money. When there really should have been a global slowdown @2002 the US and other economies including ours just choose to ignore it in the hope like Nick Leeson that it could be made up before anyone noticed. China has not been exactly shy in buying US Treasury Bonds @2 trillion I think?, for the purpose of keeping their foreign exports up to support Chinese growth.

    The simple fact is that the US dollar is over valued and has to undergo some form of debasement or the figures just won't add up. The US may be struggling with the concept that they are no longer kings of the universe but the maths don't lie. China is not only the biggest owner of US debt but if they took all 8000 tonnes of Gold from Fort Knox it would not even pay off a 3rd of what the US owes them.

    Edited by HighPressure
    Link to post
    Share on other sites

    Gold smashed the £1000 level yesterday now standing at £1015 per oz just off its all time high of nearly £1020 per oz.

    And that idiot Brown sold off a goodly portion of our reserves :wallbash:

    Link to post
    Share on other sites
    Posted
  • Location: Chevening Kent
  • Location: Chevening Kent

    And that idiot Brown sold off a goodly portion of our reserves :wallbash:

    @£200 an OZ too! theres a man with an eye for Business :wallbash: Edited by HighPressure
    Link to post
    Share on other sites
    Posted
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'
  • Location: Sth Staffs/Shrops 105m/345' & NW Snowdonia 219m/719'

    @£200 an OZ too! theres a man with an eye for Business :wallbash:

    I make that $21 Billion at todays prices compared to the $3.5 Billion he got for it at the time at close to a 20 year low.

    Unquestionably the biggest faux par ever made by a modern Chancellor eclipsing Black Wednesday by a country mile and has since been nicknamed by dealers as Brown's Bottom.

    I've switched some of my ISA equities into Gold Physical ETF's as the markets are continuing to fall with some pundits seeing the FTSE100 sinking to 5500 soon (and possibly lower).

    Edited by kar999
    Link to post
    Share on other sites
    Posted
  • Location: ANYWHERE BUT HERE
  • Weather Preferences: ALL WEATHER, NOT THE PETTY POLITICS OF MODS IN THIS SITE
  • Location: ANYWHERE BUT HERE

    An incident will occur soon which will have global proportions, I am sure. Its just a matter of time now.

    Link to post
    Share on other sites

    Such phrases as "Infamy, infamy - they've all got it in for me" - "Abandon hope all ye who enter here" spring to mind.

    At the end of December 1999 the footsie reached circa 6900 at at this rate it looks like it will be December 2019 before it reaches those dizzy heights again and going it's to put the mockers on any house improvements for a while.

    Thank gawd me & 'er indoors have got company pensions albit now linked to the CPI instead of the RPI.

    Link to post
    Share on other sites
    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    An incident will occur soon which will have global proportions, I am sure. Its just a matter of time now.

    "An incident" sounds all very dramatic, even somewhat cloak and dagger like....are you planning something Village??!

    If so can we have a heads up beforehand as at the mo many of us are distracted by the euro shambles/US debt etc

    • Like 1
    Link to post
    Share on other sites

    "An incident" sounds all very dramatic, even somewhat cloak and dagger like....are you planning something Village??!

    If so can we have a heads up beforehand as at the mo many of us are distracted by the euro shambles/US debt etc

    How about WWIII - WWII effectively put an end to the depression of the 30's. :whistling:

    Link to post
    Share on other sites
    Posted
  • Location: Near Lauder, SE Scotland, 175 m asl
  • Location: Near Lauder, SE Scotland, 175 m asl

    How about WWIII - WWII effectively put an end to the depression of the 30's. :whistling:

    Em, best wait until the UK has at least one aircraft carrier.http://nwstatic.co.uk/forum/public/style_emoticons/<#EMO_DIR#>/laugh.gif

    Link to post
    Share on other sites

    Create an account or sign in to comment

    You need to be a member in order to leave a comment

    Create an account

    Sign up for a new account in our community. It's easy!

    Register a new account

    Sign in

    Already have an account? Sign in here.

    Sign In Now
    ×
    ×
    • Create New...