You read it here first

 

          “Growth up, borrowing down, what’s not to like” was one of my Autumn Statement headlines last week. The Sunday Times came up with a similar headline for their main commentary piece on the economy this Sunday in the Business section.  A happy  coincidence, or the power of Twitter?

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30 Comments

  1. Antisthenes
    Posted December 9, 2013 at 5:42 pm | Permalink

    Coincidence or not the future for democracy and truth is looking brighter because of the power of the internet.

    • Bazman
      Posted December 9, 2013 at 9:38 pm | Permalink

      SKYNET anyone? Helping you to avoid rogue sites and making copyright infringements by offering only the very best of the net as well as protecting your children. Our closed system is seen by future governments across the world as the way forward and countries such as China and Russia are proof of our commitment to this. You would not believe how fast 120-127 Mbps is at downloading and just as important though often forgotten uploading 12+ Mbps This is just the start. What will they do to control this exchange of information as file sharing sites and everyone computers run 24/7? Mine does…

    • Tad Davison
      Posted December 9, 2013 at 11:20 pm | Permalink

      That’s true, but for how long? Knowledge is empowerment, but there are certain people who would deprive us of it.

      Tad

  2. Anonymous
    Posted December 9, 2013 at 6:02 pm | Permalink

    What sort of ‘growth’ ? Property ? Credit card spending ?

    Of property prices ‘soaring’ …

    My landlord/developer friend said “I’m targeted with capital gains tax on profit which taxman says is ‘unearned’ but, in fact, I work darn hard and take risks for it.”

    “That’s a coincidence.” I replied, “I’m taxed on profit that I earn.”

    It seems that we are taxed whenever we make an effort and whenever we have the audacity to make a profit.

    Is there ever a tax rebate for people who lose money in failed business ventures or take a hit on property ?

    If not then why not ?

    • lifelogic
      Posted December 9, 2013 at 7:51 pm | Permalink

      “Is there ever a tax rebate for people who lose money in failed business ventures or take a hit on property?”

      Well sometime but it is usually very restricted getting more so and needs you to have other profits to offset.

      Capital gains tax is of course a tax on profits you often have not even really made after inflation is considered. CGT at 28% is way too high.

  3. Richard1
    Posted December 9, 2013 at 6:05 pm | Permalink

    Hats off to David Smith, the Sunday Times’s economist. He has consistently defended George Osborne’s (albeit modest) attempts to control borrowing against the massed ranks of Keynesian economists urging more spending – Blanchflower, the FT’s Martin Wolf etc. The Keynesians – using the same de haut en bas tone which those of us who are old enough will remember from the 364 Keynesian economists who criticised Margaret Thatcher and Geoffrey Howe in 1981 – have been proven completely wrong. Just like Ed Balls. But will they be big enough to admit it and agree that controlling borrowing to re-establish confidence is the key, not sprinkling taxpayers’ money like confetti on favoured government projects?

    • lifelogic
      Posted December 9, 2013 at 7:57 pm | Permalink

      “the massed ranks of Keynesian economists urging more spending”. The endless BBC types of economists. Well sensible investment might not be too bad on the A14 perhaps, but they usually just waste it on HS2, green crap, bike lanes, pointless wars, propaganda, the EU and pigis loans and dis-functional so call public services.

    • Edward2
      Posted December 9, 2013 at 9:04 pm | Permalink

      Another excellent post Richard
      To try to answer your posed question, no they will never admit they get anything wrong even with the facts laid before them.
      They go quiet for a while and come back quite unabashed with same failed theories.

      • Richard1
        Posted December 11, 2013 at 2:14 pm | Permalink

        Thanks. It is very difficult to convince anyone of anything, except over a long period of time.

        • Edward2
          Posted December 11, 2013 at 5:06 pm | Permalink

          Richard, I have also followed the excellent David Smith in the Sunday Times as he has been proved right in his economic analysis over many years.
          As well as our host of course.

          Other economists, seem to be given much more publicity, but if you look back at their predictions, they are wrong more often than not.

    • Bazman
      Posted December 9, 2013 at 9:40 pm | Permalink

      Osborne borrowed more cut more and spent more.

    • Brian Tomkinson
      Posted December 9, 2013 at 11:10 pm | Permalink

      Richard,
      ” will they be big enough to admit it and agree that controlling borrowing to re-establish confidence is the key, not sprinkling taxpayers’ money like confetti on favoured government projects?”
      Try asking Osborne if he agrees, after all he reneged on his pledge to eliminate the deficit by 2015 and perhaps you haven’t heard of HS2?

    • lifelogic
      Posted December 10, 2013 at 6:06 am | Permalink

      You ask “but will they be big enough to admit it and agree that controlling borrowing to re-establish confidence is the key, not sprinkling taxpayers’ money like confetti on favoured government projects?”

      Well clearly not.

      How can anyone (other than a BBC economist) think that taxing people, who usually know how to use money efficiently (which is often why they had the money) is a good thing. Then to waste lots on pointless admin and just spending it on stupid things like HS2, green crap or digging holes and filling them in again. Can anyone really think this can help the economy? Yet so many in the state sector and at the BBC clearly do or say they do?

      It just wastes money, diverts it from the productive to purveyors of nonsense and sends entirely the wrong signal to industry, the wealthy, hardworking and productive.

    • petermartin2001
      Posted December 10, 2013 at 7:14 am | Permalink

      “…… 364 Keynesian economists who criticised Margaret Thatcher and Geoffrey Howe in 1981 – have been proven completely wrong”

      The criticism was over attempts by the government to control the money supply. Subsequently it was discovered that it couldn’t be controlled. Milton Friedman has himself conceded ” ‘The use of quantity of money as a target has not been a success. I’m not sure I would as of today push it as hard as I once did.’”

      The government can control the level of interest rates though and that has never been in dispute. Keynsian economists have always been of the opinion that higher interest rates will reduce the demand for lending, which in turn will reduce the amount of spending. Therefore inflation will fall and unemployment will rise.

      The Keynsian position is that it is the spending of money – not the quantity of money which determines aggregate demand.

      Inflation was very much a problem in the late 70s and early 80s. Should it have been tackled the way it was by forcing up base interest rates to as high as 17% in 1980 ?

      That was a political decision and not the application of any new economic theory. Everyone can form their own opinion on the necessity for it.

      • Richard1
        Posted December 10, 2013 at 9:46 am | Permalink

        It was about more than that. the economists were opposed to the view that borrowing needed to be brought under control to re-establish confidence. They thought more ‘investment’ (= spending) was needed to kick-start growth.

      • petermartin2001
        Posted December 11, 2013 at 2:43 pm | Permalink

        Anthony Barber, presumably with the backing of Mrs Thatcher’s cabinet, thought the same thing too which is why the policies were reversed after a few years.
        Yes, more spending was required to kick-start growth but the mistake made was to only look at public sector spending. If the public sector are in deficit, the non government sector are in surplus and vice versa. It is a simple accounting identity.
        When the public sector are in surplus, or the deficit looks manageably small, everything superficially looks good; but, that’s only because the private sector are doing the borrowing instead. To dampen down the demand for credit, interest rates are increased, asset prices fall and a recession invariably follows shortly afterwards.
        So, yes, the amount of spending in the economy does determine both investment and growth but it’s not just government spending which needs to be monitored.

        Reply Mr Barber was not in Mrs T’s cabinet

        • petermartin2001
          Posted December 11, 2013 at 8:15 pm | Permalink

          Yes, you’re right. Thanks for the correction. I should have said Nigel Lawson. It’s interesting, that both made pretty much the same policy mistake of creating a boom followed by a bust.

    • Narrow shoulders
      Posted December 10, 2013 at 8:11 am | Permalink

      During the life of this parliament the government will have borrowed (overspent) half a trillion pounds while taking a greater percentage of my income in tax.

      How is that not a keynesian stimulus?

      Restricting the rate of increase is not a reduction.

      • Tad Davison
        Posted December 10, 2013 at 10:27 am | Permalink

        Makes ya wince doesn’t it. I just can’t see an end to it.

        Tad

    • Tad Davison
      Posted December 10, 2013 at 10:34 am | Permalink

      As a measure of the Keynesian mentality, I thought I’d add this quote I came across a few days ago.

      ‘At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.’

      For the benefit of the likes of Mr Balls, who can tell me what’s wrong with it, and what might the consequences be?

      Tad

      • Edward2
        Posted December 11, 2013 at 5:18 pm | Permalink

        Tad, it is a shame how Keynes original ideas have been hijacked by many politicians and modern economists.
        He believed that saving must have its price and reward, ie a decent return in the form of interest paid to the saver, priced in relation to the level of risk the saver was prepared to take.
        Encouraging saving, he said was vital to fund the investment which in turn created consumption and the virtuous circle of growth and reduced unemployment.
        He would not have found negative interest rates acceptable.
        But when Governments and Banks can create money by printing and the magic process of QE, savers can be exploited, as they currently are being, because they are not the only way credit can be created.

        • Tad Davison
          Posted December 12, 2013 at 11:12 pm | Permalink

          Spot on! There’s much wrong with the system as it is, and I try my best to see where it might all lead to unless it changes direction. I can however see a wholesale shift in the economic balance towards the East, and I’m worried where that might ultimately leave the UK.

          Tad

  4. margaret brandreth-j
    Posted December 9, 2013 at 6:12 pm | Permalink

    neither.

  5. Posted December 9, 2013 at 10:10 pm | Permalink

    “What’s not to like?”
    The low interest rates which mean that my savings are fast depreciating in value due to inflation, in turn meaning that we will have to be progressively more frugal as the years go by. This is made worse by the fact that the increase in the cost of living for pensioners calculated by, I think Age UK, is considerably higher than the RPI, largely because we don’t buy much in the way of white goods or electronics which haven’t risen much in price and so lower the RPI.

  6. Bryan
    Posted December 9, 2013 at 10:11 pm | Permalink

    Why are people surprised at the pontification of Economists. These prophets are never wrong, even when they are never right. It comes with the territory.

    Apparently the OBR can look ahead 50 years? If those 3 wallies who gave ‘evidence’ before the Public Accounts Committee are to be believed then that will be in 2068, give or take 10 years or so!

    Time for a cup of hot chocolate.

  7. Brian Tomkinson
    Posted December 9, 2013 at 11:11 pm | Permalink

    A misleading headline is no cause for boasting.

  8. Dennis
    Posted December 10, 2013 at 11:16 am | Permalink

    But did the ST article say what it didn’t like? There is plenty.

  9. Stuart Saint
    Posted December 10, 2013 at 2:10 pm | Permalink

    Just the usual lazy journalists we have come to accept and who insist on being paid far more than can be justified.

  10. petermartin2001
    Posted December 10, 2013 at 8:52 pm | Permalink

    Many contributors to this blog would be critical of the recovery process. They would argue that its all done by borrowing. The credit card bill is getting bigger etc. It is certainly true that the government is spending more than it receives back in taxation.

    I’d just ask that they might ask themselves some questions:

    Why is it s so difficult for governments , the world over, to achieve a balanced budget? And why does cutting spending and raising taxes never seem to quite work as simple calculations would predict?

    How did that £10 note in my wallet came into existence for the very first time? The government can only impose taxes when there is money out in the economy to start with. And if it’s not allowed to spend money it doesn’t receive from taxation, how could that ever happen?

    If, for every government liability there is, somewhere, an equal asset, as any good bookkeeper would advise, where are they? Who holds the assets? If the government didn’t have the liabilities , what would happen to those assets?

  11. Javelin
    Posted December 10, 2013 at 11:03 pm | Permalink

    Overall taxes up. Individual tax rates down.

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    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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