The Greek government is discovering quickly how imprisoned they are by all the accumulated debts and the Euro they inherit. Being part of the iron discipline of the Eurozone makes things worse. Argentina, Venezuela and others show that whilst having you own currency can helpĀ with devaluation Ā staving off disaster for longer, you can also come badly unstuck as a country ifĀ the stateĀ spends and borrows too much even with its own currency. If you devalue too much overseas debt becomes very expensive, and imports too become much less affordable.
There are some who think it is always caring for the state to spend more. There is always more poverty to relieve, more good works the government might like to undertake, more public service to increase and improve. The problem is if you overdo it, far from being more caring, the government ends up making brutal cuts at the insistence of its creditors. I doubt Greece wanted to cut public sector wages and make large cash reductions in what they spend on their health service, but they were driven to that by poor financial management.
There are others who think that it is always good for an economy for the state sector to run large deficits. They argue that the private sector or the overseas sector can easily lend a surplus to the state, so isn’t it better if the state deliberately overspends so there is more spending and activity in the economy? Unfortunately this doesn’t work out either. Greece has just shown you can have a recession which loses you 25% of output whilst continuing throughout that period to run much larger deficits than more successful countries. If running up large state debts produced good growth and wealth increases, then we should expect countries like Greece, Argentina and Venezuela to be amongst the richest in the world.
I hope the UK is reminded of the lessons of prudence by the parlous Greek state. Borrow too much and you reach the point where no-one wishes to lend you any more. Borrow too much and you have to spend more and moreĀ of your income on interest charges, leaving less for what you need. Borrow too much and you end up having to cut drastically as your creditors insist.
In each case there is also all the spending which is not as advertised. Governments spend too much on themselves very often, and are commonly inefficient and badly managed. In a country like Greece tax collection is very difficult, as so many people scorn the state they live in, regarding the taxes as unfair or avoidable.
January 31, 2015
When the government took over we were told that it would be smaller and leaner. Please tell us what happened. It seems to have interfered into more of our lives. Spent more of taxpayers money on vanity projects. Spent more time on nif naff in parliament than is necessary. It needs to get a grip or this country will go the way of Greece.
January 31, 2015
Dear John–You are absolutely top notch at setting out all the aspects of the blindingly obvious ultra clearly–Are there really people, people with half a brain that is, who disagree with any of what you say today? The Greek situation is enough to make one weep and was to a very large extent positively caused by the single Euro interest rate set low to suit the German cohort but ridiculously too low for Greece, who just joyfully grabbed the cheap money without, as they thought, a care in the world, under what they saw as a EU umbrella. Not much “discipline”, iron or otherwise, from within the EU while Greece was building up its insolvency. Again, how could anyone say different?
January 31, 2015
@Leslie Singleton; “Are there really people, people with half a brain that is, who disagree with any of what you say today?”
I dare say that they will be a few, dependant on how many Euro-federalists and/or Green party supporters are reading John’s diary!
January 31, 2015
Good morning.
The issue I have, and have alluded to in these pages, is that of the purpose of government. ie What is government for ?
To explain. Lets take HS2. Here we have a large project that, although not mandatory by the EU, we seem to want to build it regardless. This is a government backed project with taxpayers money. But was this always the case ? History suggests not ! The lines that we use today, whilst not the original, were laid down by private enterprise. Private capital was sought and the money used, with profits going to investors and back into the wider economy. If there was any losses, they were borne by them and not the State or the people.
Today, we have a situation where business, and in particular big business, uses government as a financier. Where as in Capital Markets such as the City of London would scrutinize such enterprises such as HS2 and advise investors on its risk, we have a government system that can act as a lender with a truly bottomless pit of money to spend. Only government, and not business, can tax. Business can charge a fee, but people are not obliged by law to pay it, until recently that is. Now we have the Climate Change Act we are paying private business through either subsidised and useless windmills or STOR via our energy bills for their investments. Investments that would have never been made had government not created the right conditions.
Big business has quite rightly identified government, and in particular, Supranational Government, as a means to profit from. Why bother with all those investors, when you can have the entire wealth of nations and indeed whole continents at your disposal.
And that is why big government, particularly loved by Socialists and Tories alike, is such a bad thing. It creates a crony capitalist system that Socializes losses, but Privatizes the profits, as we have seen with the banks.
Governments and their spending displaces and destroys the natural balance of a Capitalist economy. They create boom and bust. It is no coincidence, in my opinion, that the UK is growing just before the 2015 GE. I predicted such way back in 2010. As former US President Bill Clinton once famously, and quite rightly said; “It’s the economy ‘stupid’ !”
Governments both absorb and interfere in wealth and wealth creation. The fact that they like to tell us that it is ‘they’ that are creating a growing economy, is nothing more than a big fat lie.
We do not need them. We need them to stay well away from us and the money supply, as we can all see.
January 31, 2015
I am reading a book about China by a banned Chinese author. It is 2013, and the Dollar has tumbled by a third and China is the richest nation in the world. And that justifies – tyranny.
America is currently some $14,000 billion dollars in debt.
We are currently a tenth of that but we are spending Ā£84 billion on servicing our debt. And the government, to which you belong, talks about reducing the deficit!
Getting into debt is fatal. Why? Because it hands power to the creditor. We lost our Empire through (necessary) debt and we were terribly poor. Suez was when America called in the debt.
I wonder when China is going to call in their debt.
PS If you reward failure with government hand-outs, guess what you get? Much more failure.
January 31, 2015
Mike Stallard:
‘Getting into debt is fatal. Why? Because it hands power to the creditor.‘
This was drummed into me as a child, so effectively that I took for granted that everyone thought that way. It took me a while to understand that many people, perhaps most, think of money as magic confetti, to be grabbed by the handful from a fathomless magic bucket and thrown at whatever they desire in order to possess it. I think our political class bears much of the responsibility for inculcating that belief in the minds of the public – over the past century or so (I’m not laying blame at the feet of the current breed).
January 31, 2015
I recall the Conservative minister for higher education explaining to prospective students that getting into debt to the tune of Ā£40k+ was a great deal in order to invest in a lucrative university education. You can double this for 5+ 2 practical year courses such as engineering and architecture, which result in a low salary and job insecurity. Perhaps 2 brains only knows ex students taking law and medicine.
January 31, 2015
Reading your post reminded me of a day some years back when a colleague (who was always complaining of being “skint”) told me she had come into some money and was going on an exotic holiday with her partner. “Have you been remembered in a relative’s Will?” I asked. “No, my credit card limit has been increased by Ā£2ooo!” she replied.
If that attitude is commonplace it explains a lot.
January 31, 2015
Looking at what one pound would buy in 1965 vis-Ć -vis the same transaction today and you can understand why people get in debt. If you can afford the interest payments you will never have to repay the principal. Indebtedness is economically rational, saving is for mugs in our world.
February 1, 2015
William
I got the same lesson as you from my parents, because If you cannot afford it then do not buy it until you can.
If you can afford the repayments, then you can afford to save for what you want.
The only exception to the above was a mortgage.
January 31, 2015
America in debt? Problem with that idea is that at low or zero rates of interest, the so called “debt” is almost the same as base money, as Martin Wolf pointed out in the FT recently. So is America really in debt? Arguably not.
Re Suez, even if Britain had had no debt at all, America would still have been able to mess us up in exactly the same: they’d just have sold pounds sterling big time. In fact as part of their “messing up” strategy they had to sell pounds ANYWAY. I.e. if they’d sold their holdings of UK debt but not converted it to dollars, that wouldn’t have bothered us too much.
February 1, 2015
This is confusing debt with cost of debt. Cost of debt denominated in the currency of the government can always be zero simply by the government printing the interest.
Debt itself is an entirely different issue as it is spending income that has not yet been earned.
Ultimately the debt will need to be repaid and this will result in the govenment needing to raise vastly more revenue to continue spending at the same rate.
So long as the USA dollar is a reserve currency they can continue increasing their debt indefinately whilst the rest of us share the burden of the inflation that follows.
This is a pretty dangerous assumption however with the risk that the markets will eventually refuse to accept the dollar as an international means of exchange in favour of some other currency or commodity.
January 31, 2015
The real question is what is done with the borrowing. If it is invested wisely, in things that give sound returns and create jobs, then it often makes compete sense.
In the case of governments alas this is so very rarely the case. This due to corruption, incompetence, nepotism, fraud and general misdirection. It will more likely be used to buy votes, push propaganda, build pointless wind turbines and the likes and line the pockets of the powers that be.
January 31, 2015
Germain Greer (on Question Time) illustrated perfectly the problem of the endless stream of greens who lack any understanding of science. She complains of the lack of improvement in solar cell technology over the years. What she fails to grasp is that there are basic laws of physics, energy density and economics that cannot be overcome by wishful and green behind the ears thinking.
She might as well as complain that mankind has made so little progress over the years in learning to fly by flapping their arms.
January 31, 2015
Also Lord Debden (John Gummer) on any questions seems equally out of touch. He seems to think new facilities & ways to store “green” electricity will be developed.
There are lots of ways to store electricity already but they are all very expensive, need lots of space and waste 20%+ of the energy. So generating very expensive green energy, then expensively storing it and throwing 20%+ of it away makes even less sense.
The best solution is to generate as needed with something convenient to turn up and down coal, hydro, gas & oil. We have know this for years.
January 31, 2015
“lack of improvement”? She must be made. The cost of solar has come crashing down.
January 31, 2015
Indeed as you say cost and efficiency have improved a lot but at the end of the day there is only so much energy you can get per M2. Especially true in the short days and low sun of winter in perhaps cloudy Liverpool or Manchester. Winter (and evenings) are of course, rather inconveniently, when most energy is needed.
January 31, 2015
You are both wrong and you are deluded as you are a science denier hiding behind science, There has been no improvement in solar panels. Not true
Swanson’s law, the learning curve of photovoltaics says otherwise.
Swanson’s Law is an observation that the price of solar photovoltaic modules tends to drop 20 percent for every doubling of cumulative shipped volume.
http://en.wikipedia.org/wiki/Swanson%27s_law
More sickening ignorance on your part lielogic do you ever look anything up or try to learn?
January 31, 2015
It’s funny when people immediately stray off the subject and get into heated arguments about, for example, the sun’s rays.
January 31, 2015
There is a famous soviet film called Burned By the Sun. Maybe some of you should take a look. It surprises me how close we are.
January 31, 2015
@Bazman; Please do feel free to explain how they have developed PV to work in the absence of adequate sunlight, it doesn’t matter one jot if improvement in solar panels have been made when they can’t actually generate electricity due to known acts of nature. This was the problem (and that of becalmed/stopped wind turbines) that Lord Debden was eluding to with his dream regarding storage, as even simple cloud cover can cause drastic drops in output.
February 1, 2015
You have been told this before Jerry me old mate.
In many areas solar will not be viable as technology stands. Where it is viable can still be used at night or when there is a fall in light caused by a lack a passing cloud by the use of a solar thermal power plant which basically stores unused energy in the form of heat in liquid salt.
Wind power has other energy storage methods like using excess power to pump water against gravity.
In both cases viability depends on application. You are telling us it can never be viable and has no use. This is just plain wrong and not based on anything of substance.
Like lifelogic you just seem to forget what is wrote as you go along and seem unable to use the internet. Why?
February 1, 2015
Bazman, is any if this technology actually powering a small town let alone a large city, until it does you are talking nonsense, happy daydreams!
February 2, 2015
Ignorance is not a virtue Jerry.
http://en.wikipedia.org/wiki/List_of_solar_thermal_power_stations#Under_construction
Happy daydreams.
February 2, 2015
@Bazman; Under construction, thus not built, not proven and as if Wikipedia proves anything anyway – and you call me ignorant and suggest that I’m the one daydreaming.
Fact, coal, oil and gas fired power stations have been built, have been proven. Fact nuclear power stations have been built and have been proven. Fact hydro-electric generation plants have been built, have been proven.
Happy daydreams Baz me-old mate!..
February 2, 2015
Don’t give up do you. Look at the dates of completion on many of them many have been up and running since 2008 Early designs used these focused rays to heat water, and used the resulting steam to power a turbine. Newer designs using liquid sodium have been demonstrated, and systems using molten salts (40% potassium nitrate, 60% sodium nitrate) as the working fluids are now in operation. These working fluids have high heat capacity, which can be used to store the energy before using it to boil water to drive turbines. These designs also allow power to be generated when the sun is not shining.
http://en.wikipedia.org/wiki/Solar_power_tower
Denying the facts and not reading properly is not acceptable.
Cars are still under development and look how many of them there is. Deluded anti science as per from you.
January 31, 2015
Bazman could you perhaps confine yourself to commenting on things I have actually said rather than things I have never ever said, such as: “There has been no improvement in solar panels”.
January 31, 2015
Germain Greer (on Question Time) illustrated perfectly the problem of the endless stream of greens who lack any understanding of science. She complains of the lack of improvement in solar cell technology over the years. What she fails to grasp is that there are basic laws of physics, energy density and economics that cannot be overcome by wishful and green behind the ears thinking.
She might as well as complain that mankind has made so little progress over the years in learning to fly by flapping their arms.’
Your post above saying this may have some relevance.
January 31, 2015
The aim is to shut down debate by heaping abuse on anyone they disagree with.
The left in general take a superior high horse position on all issues.
Only they are right, all others must be “deluded” et al.
The left have called for those who dare to question their beliefs on for example climate change, to be refused public sector employment or even be imprisoned.
Take no notice and state your case and keep freedom of speech alive.
February 1, 2015
Indeed it is relevant, it shows very clearly that I said nothing remotely like: āThere has been no improvement in solar panelsā
I was merely commenting on what someone else had said.
February 2, 2015
‘She might as well as complain that mankind has made so little progress over the years in learning to fly by flapping their arms.ā
This in relation to solar panel which is what you are talking about says that it is not surprising that no progress has been made in solar panel technology.
You are agreeing with her.
It is obvious by reading that this is the case. You where not just commenting on what she had said.
How stupid do you take us for?
February 1, 2015
Surely the price of solars, especially PVs which I believe are all made in China, is a matter of the usual supply/demand economics. If the price is going down it is because the demand is too (or because the manufacturing base has been ramped up for short-term gain regardless of the later consequences). Quite wisely. Of course, China being a command economy, betting our energy strategy on surfing the self-interest of the People’s Republic seems dubious and uncertain, whatever the technical effectiveness or desirability of these things.
February 1, 2015
Solar panel do not operate in a free market China and Taiwan has incurred tariffs for using the world to dump cheap solar panels on in order to fund their research.
http://www.theguardian.com/business/2013/jun/04/eu-tarriffs-dumping-china-solar-panels
February 1, 2015
Lifelogic: “[Germain Greer (on Question Time)] complains of the lack of improvement in solar cell technology over the years.”
You forgot to mention that it was ‘Thatcher’s fault’! š
February 2, 2015
Indeed, to lefties nearly everything is Thatcher’s fault.
January 31, 2015
Meanwhile it seems the DPP wants to shift the burden of proof in rape cases still further on to the accused.
http://www.telegraph.co.uk/news/uknews/law-and-order/11375667/Men-must-prove-a-woman-said-Yes-under-tough-new-rape-rules.html
Clearly all sex must take place after a legal consent form is signed (indeed perhaps even resigned every thirty seconds during the sex act lest on party changes its mind part way). Perhaps a government trained and licensed observer is also needed to constantly verify this was freely agreed.
Or we could just allow any woman to have the right to put any man put behind bars for ten years. Just on the basis of her (uncorroborated) say so and while her identity is fully protected. This certainly seems to be where they are heading.
January 31, 2015
This thought occured to me and while looking the rules up on the various government sites, I discovered that last November Mrs May was pleased to enact a law in which the concept of financial violence is now a criminal offence punishable by a long prison sentence. This would include witholding spending money from a woman, who can then make a complaint to the police, who have a duty to investigate. There is no time limit. The idea, as usual came from the US, where there has been a big increase in abuse or domestic violence since introduced. There may be a time limitation there.
Fortunately for me my ex is no longer here to report me for closing my joint account 45 years ago when I discovered she was spending my meagre grant on clothes bought on a store card. No, this is not made up and the leading conservative MP on the tele said he thought Mrs Saunders, the DPP was some sort of hero for taking action and sorting the problem out.
I am advising my son to avoid marriage like the plague.
January 31, 2015
Indeed UK government do seem determined to discourage marriage and encourage divorce, both through the benefit system, through the divorce laws – certainly for anyone with any assets.
The mother of any children nowadays will, nearly always, get the bulk of the assets, custody of the children, an income for life and be given the marital home. This regardless of the cause/blame for the divorce.
This is bad for men, woman and society in general.
February 1, 2015
I woke up to an appeal for Women’s Aid today. The plight of women suffering violence and control at home and having to seek refuge was stressed. I never understand why, if a woman is being beaten, the police can’t or won’t turf out the offender, but instead charities have to find accommodation for the family and leave the husband in the house.
However, the piece slipped in the witholding of money and finding out how it is spent into the picture of ‘controlling behaviour’ and violence. This is the new mantra. Well, my better half must spend half her time trying, unsuccessfully to control my behaviour and spending. I think some of her spending is daft too. Fortunately, we do not take it too far.
But what if one partner in a marriage is overspending or wasting too much cash on smoking and drink, when the family has limited resources? A responsible person should have a duty to avoid getting into debt and therefore withold cash and limit credit. Now, even after a breakup and over unlimited time that person could face a criminal prosecution.
February 1, 2015
Just to validate this discussion, the subject is debt. The likeness is between a marriage of countries, in the Punch and Judy show where Mrs Merkel is the evil husband, witholding money from the abused Judy,Mr Wotsinamis.
January 31, 2015
This does seem to be a breach of the basic principle that someone is innocent until prove guilty. In the case of this new practice, those accused of rape will have to prove their innocence. One wonders how DPPs get selected. The last one, ‘Sir’ Keir Starmer, who always seemed to be a leftist turns out to be exactly that and is now a Labour candidate. Perhaps the judiciary has been suborned by the statist left like so many other institutions – ofsted, DECC, the BBC, most of the groups purporting tom represent NHS employees etc.
February 1, 2015
Richard
You are quite correct about the statist left installing their sympathisers in positions of power. They realised long ago that throughout Europe power was being transferred to unelected officials via quangos and the like and both Blair and Brown were experts at this.
You only have to watch BBC News for a while to see this in action and unfortunately David Cameron seems to have made very little effort to change the status quo.
February 1, 2015
Then there is always the re-trial if they jury mis-behaves. A bit like the re-referenda the EUSSR likes so much. As a Lawyer friend said a long time ago when I questioned various misjustices, ” You are mistaking justice with law. They are not the same.”
February 2, 2015
Often not remotely the same.
February 1, 2015
In the case of the woman just silently going along with the act through fear you presume that she has consented for example, there are many others? This is what the you would consider consent? It’s a case of not shifting proof of innocence onto the man but the DPP asking for more rigorous interrogation of the man that consent was provided or the consenter was in a fit mental state to consent.
Yu yourself have little grasp of reality when you are posting:
Bazman could you perhaps confine yourself to commenting on things I have actually said rather than things I have never ever said, such as: āThere has been no improvement in solar panelsā.
After writing that anyone who believes that there can be any improvement has little economic grasp and is wet behind the ears.
Guilty as charged.
January 31, 2015
The Eurozone may have an iron discipline, but it is an intergovernmental structure within the EU. If the Eurogroup were to decide to create a better set of conditions than only austerity and reform, it can do so.
It still leaves the (un)willingness of financial markets as lenders and of investors when countries have too much debt
January 31, 2015
Suppose that Greece is “driven out”, who or what exactly would do the driving? What do the dreaded Treaties say? It would have to “legal” of course (right?) but Brussels types will die in several ditches rather than admit they were wrong, not to mention to save their jobs–who would employ them?
January 31, 2015
Postscript–Sumptuously paid and pensioned of course
January 31, 2015
Yes as always, moderation in all things is the only way to become a less imprisoned member of any society.Freedom is impossible in its complete meaning ,but being subservient to others due to debt is a locked cage which gives the lion tamers a larger and more cruel whip.
January 31, 2015
“There are others who think that it is always good for an economy for the state sector to run large deficits.”
I believe this is the line that Peter Hain is pushing in his new book which has had a big promotion on the BBC this week.
John, I bet you wish you could have had that kind of advertising for one of your books?
January 31, 2015
Cogently and concisely argued as always, it does show that if a government is going to overspend, it should always remember to abolish boom and bust first. That way, all will be well for ever, indeed things can only get better.
January 31, 2015
So government resorts to printing money. Devaluing my savings and making me pay large subsidies to (named landowners etc ed)for stupid windmills
Greece should default and return to the Drachma immediately. After the election Osborne will revert to printing more money. Useless the lot of you
January 31, 2015
I’ve got to go out in the sleet and continue clearing up from the massive pruning of a tall beech hedge, so I shall wait and see what others have to say about this … I’m sure there will be some trying to convince us that government budget deficits are actually a good thing, the bigger the better, and likewise a trade deficit is actually a good thing, and an overall balance of payments deficit is really a good thing … according to modern theory deficits all round are what we need, apparently, contrary to the conventional wisdom which has previously prevailed from time immemorial …
February 1, 2015
“Iām sure there will be some trying to convince us that government budget deficits are actually a good thing, the bigger the better, and likewise a trade deficit is actually a good thing”
Lets start with trade deficits. I grow pears. You grow apples. I swap 5 of my pears for 4 of your (equally valuable) apples +1 of your IOUs every week. I’m in surplus financially , you’re in surplus in terms of real goods and services. I’m China. You’re America. Which is better?
I’d argue there is no correct answer to this. Both can be good or bad things. But the long term accounting repercussions of accumulated trade deficits do need to recognised, especially the way in which these external deficits impact on internal deficits.
January 31, 2015
It is baffling to me that sane people, especially university graduates with the ability to get themselves elected to serve in national governments, need to be persuaded of these profoundly obvious facts.
February 1, 2015
Beware of the too “profoundly obvious!”
Our senses and experiences of money are developed on the microeconomic level. What is “profoundly obvious” at that level may well be completely wrong at the macroeconomic level.
January 31, 2015
South American countries that got mugged by US Banks to borrow in US Dollars, learnt the hard way about borrowing in foreign currencies. When they got in deep they tried to “peg” their own currency to a much bigger currency and had to defend the peg with their hard earned exports’ foreign reserves. JR and John Major know this problem well. Black Wednesday 1992; a Conservative government was forced to withdraw the Pound Sterling from the European Exchange Rate Mechanism (ERM), when it gave up trying to hold the bottom exchange limit. George Soros, by short selling sterling, supposedly made a billion.
A sovereign fiat currency issuing government can’t be forced to make brutal cuts by any creditors in its own currency. The government issues (spends into existence) its own monopoly currency, it has no “creditors” in that currency. If it is dumb enough to borrow in someone else’s currency; you might as well join a currency union.
Greece has no control over the currency it is using, the Euro is a foreign currency in Greece. The Euro has always been massively overvalued relative to Greek economic fundamentals. This was very useful for German Banks that could lend Euro to Greeks to buy BMWs etc. Allowing Greece to keep Germans in work while Greece was putting its own workers on the dole.
Greece has borrowed too much mainly to plug holes in its commercial Banks, in which the Greek government has a large ownership. Greece has to borrow to fund its deficit under EU rules, it has no choice. It is in the same position as normal households which are also currency USERS like Greece. States that ISSUE their own sovereign currency, do not have to borrow from anyone. They can pretend to borrow like the USA and the UK, by issuing debt instruments “pound for pound” (nearly), that matches their deficit. These “debts” give out free government money called “interest” which is fiscal stimulus for the economy (as long as the recipients spend it and not save it).
The process of QE could literally buy up all the outstanding government debt and replace it with the “reserves” the government Treasury spent into existence originally, (it has about 25% of it at the moment with QE1). The UK Treasury could finish up with no outstanding debt and all the “money” it has spent since the big bang, would be a large pile of “reserves” at the BoE. The only change would be that all the free money “interest”, would be taken out of the economy. The private sector would have circa Ā£50 billion less to spend and the economy would slow down. It would have the same effect as a large tax increase; or, as currently, a large dose of “austerity”.
January 31, 2015
Perhaps you might remind us just how much extra your Chancellor has borrowed in the past five years? Eliminate the deficit by 2015 was what you promised and like so many other things you have singularly failed. Please don’t blame the LibDems with whom your leader couldn’t wait to form a coalition. I also remember those fine words from Cameron and Osborne that it was wrong to burden future generations with our debts and then they proceeded to do just that. They often say the right things but fail to deliver or do the very opposite.
January 31, 2015
Brian – It is notable that the Tories will do all sorts of deals with the LibDems and not with Ukip.
Why ever not ? Ukippers are surely recognisable as Tories in exile. Grant Shapps admitted this week that Ukip were not an extremist outfit in his defence of accepting Amjad Bashir because “…we take anyone so long as they are not from extremist organisations.” except that he was talking about Mr Bashir’s involvement with the Respect Party and not Ukip – so there we have it. Bashir belonged to Ukip (a non extremist organisation) and was accepted by the Tories (though I bet they wished they hadn’t.)
So if Ukip are not extremist and are far more popular than the LibDems in the polls – and in elections – then why on earth won’t the Tories deal with them ?
What reason for it other than the Tories aren’t really Tories but Blairists ?
January 31, 2015
I think Cameron would rather have a deal with Labour than with UKIP, he is clearly far closer to them in policy. Wrong on every issue in fact.
He is for green crap, pro ever more EU, pro uncontrolled immigration, has made 299 tax increases, is for bloated government, for the dreadful NHS, for over regulation of everything and for endless government waste. Where is the difference.
January 31, 2015
(silly comment removed ed)
Like many in this country using other peoples’ money to add to a personal lifestyle is an easy trap to walk into . The mistake is as much on the lenders side as it is on the borrowers side . Greece has been allowed to get into an impossible level of debt because the lending agencies they dealt with were persuaded by shallow political motives to offer facilities that could not be met . If borrowers believe “it doesn’t matter” and “tomorrow is something we can forget” , they make a very bad mistake . The world is simply not fat enough economically to throw its wealth away on irresponsibility . Greece cannot be “let off”. Heads must also roll on the lenders side and mechanisms put in place to recover the debt and not allow it to happen again .
If Angela Merkel wants Greece to remain in the EU and to maintain the disciplines she expects for Greece to repay its debts , then she is living in “never never land”. Her mathematics are seriously at fault as is her understanding of human nature . If Germany is to follow the wishes of its leader , then they have to cough up at least half of the debt level Greece owes . Watch the space !!
January 31, 2015
I agree with your arguments and would only add that it is immoral for governments to behave as recent Greek goverments have behaved.
January 31, 2015
I draw your attention to this article by Neil Barnett of CPS:
http://www.capx.co/external/will-greece-auction-its-veto-for-debt-relief/
This draws attention to two significant vetoes held by the Greek Government over renewal of EU sanctions on Russia (renewable in July) and NATO action under Article V (an armed attack on one is an attack on all).
January 31, 2015
Your Posting today John outlines the perfect reason why Governments should not have any automatic right to borrow in the peoples name.
Politicians come and go, the people have the debt forever.
The fact is over the years, politicians have developed a whole range of words to try and cover up debt and borrowing, in a deliberate attempt to fool the public.
Borrowing, using the word Investment.
Hire Purchase, using the word PFI.
Rising debt , using the words reducing the Deficit.
Devaluation, using the word Revaluation.
Devaluation, using the word Quantitative Easing.
Lack of tax income, using the word Shortfall.
Governments have no money, they simply spend and use from what they gain in tax payments from the population and from business.
January 31, 2015
It is an interesting debate. In a way its very helpful as the leftist case put by Syriza is much more spending and borrowing is needed but they are obliged to be clear that they expect someone else – mainly the German taxpayer – to foot the bill.
The extent of denial of the EU is extraordinary. There was an interview today with M Moscovici, a French leftist, now an EC commissioner. He completely refused to acknowledge that one way or another there is going to be a loss on Greek debt. Of course the best solution is for Greece to exit the euro, its creditors will take a big hit, Greeks will be much poorer, but they will be able to stand on their own two feet and provide whatever it is – yogurt, holidays, shipbuilding – that other people are prepared to pay for, at a competitive price. This would be a much better route to restoring Greek dignity and economic stability than begging and blackmailing the Germans.
January 31, 2015
leftist this, leftist that. Coded talking points as spoken by true neocon. And not one mention of the famous bank who saddled the Greeks with so much derivative debt that could never be worked off even if there were 28 hours in a day.
I suspect that if you really looked you would find most all the EU problems are bank debt. Ours too. After all, $700trillion outstanding derivative debt(BIS) is going to cause a few problems.
February 1, 2015
What are you talking about? There is nothing ‘neocon’ about pointing out that Greece’s problems are the result of over-spending by left wing govts, who believed as leftists always do, that more spending is always better. What the euro did was enable these bad policies to continue for much longer than would have been possible had there been proper market pricing based on Greece’s actual risk. What is interesting about having such a leftist govt in a currency union is it exposes the fallacy of socialism – the only way to pay for it is begging and blackmailing fellow member countries.
Sure, blame investment banks for assisting the Greek govt in circumventing the eurozone borrowing rules if you like. But mind you blame the high spending – leftist – mentality which wanted to so engage investment banks.
February 1, 2015
Neocon this Neocon that. Some of the EU commissioners come from a communist background, whereas the opinions of the Greek finance minister are not particularly leftist at all, but he has very strong opinions on how the EU is run and bailed out banks at taxpayers expense, after allowing the crisis to happen in the first place.
Talking of neocons and leftists, have a look on Wiki at the political background of the new NATO boss and compare it with the woman who kicked off the trouble in the Ukraine with her **** the EU call. Is Putin, ex KGB a leftist or a conservative? They seem to be all mixed up.
February 2, 2015
They aren’t mixed up,they’ve crossed over….Russia and China have moved sharply to the Right (even if the ruling party of the later still calls itself Communist) having discovered the hard way that communism doesn’t work and Europe and the USA have lurched to the left (compare centre right/conservative policies now with those from 30-50 years ago)as politicians have sought to buy voters….and neo-cons,despite the name,are considered by many to actually be neo-Trotskyite in their pilosophy.
January 31, 2015
If I had a fiver for every time during my life that I’ve heard someone say something like “The Government (or the Council) can afford it, they’ve got stacks of money”, I suspect that I’d be quite a rich person!
There appears to be huge numbers of people who don’t seem to see any connection between the money that the government spends and the tax we all pay, and this includes people that are otherwise well educated.
The government, by its actions, almost seems to encourage this thinking. It always seems to be producing extra money for some new trendy project. Almost every day one reads that the government has “found” some money to spend on this, that or the other!
To me, the worse thing about the present state borrowing is that the interest payable on the borrowings is larger than the defence budget, and rather than trying to reduce borrowing and interest, the government is cutting our defence to make ends meet and still running a deficit which further increases the interest payable.
PS Thanks to the government for spending some of the money it hasn’t got on paying a decent interest rate on the “pensioner bonds”. I’ve taken advantage of them, but in spite of this bribe, I still won’t be persuaded to vote for the Tories at the next election. Does Cameron/Osborne think that we are all senile?
January 31, 2015
EP
Yes a reasonable rate for Pensioner Bonds, but with a little twist.
No longer is the rate tax free as with some other NS&I savings.
Premium Bonds
Savings Certificates
Thus the headline rate is not actually a true rate for anyone who has an income over the annual personal tax allowance.
For the first time the Government claws back some of the interest paid at source, and you have to claim it back from the Government if you are a non taxpayer.
Yet more complication again, instead of the simplicity of the past.
January 31, 2015
Yes, but 4% less tax is better than 1.5% less tax which is probably the best on offer elsewhere.
I just wonder how HMRC is to cope if all the non tax paying pensioners like my wife apply for a tax refund; unlike with her building society account, she can’t sign a form to get the interest paid gross.
Seems another example of one government department not knowing what another is doing and ending up costing the taxpayers even more money.
February 1, 2015
EP
Agreed.
Once more the Government chose the most complicated way possible, (perhaps they hope people will not claim the overpaid tax back)
Just like the launch fiasco, where you could not do the simple thing and pick up a form from the Post office, fill it in yourself, and post it off with a cheque.
You had to apply online or by telephone, and pay with a Debit Card.
Only problem was that not all pensioners have a Debit card, or even if they did, it then turned out many Banks would not allow such funds to be transferred, for possible fraud and money laundering reasons, so you had to get clearance from your Bank first that they would honour the transaction.
The result a change of rules after one week of absolute chaos.
You now telephone NS&I and they fill in an application form for you (20 mins taxpayer funded employee) they then give you a reference number, you then send them a cheque with reference number on both the cheque and front of the envelope, within 14 days, then they confirm your purchase sometime in the future.
What an expensive fiasco.
They only had 9 months to plan for such !
January 31, 2015
We also need to be aware of the problems created by forth coming elections. The plans of the government, mainly caused by next May’s elections seem to have already increased next years deficit by about 20%. Most of the changes cannot be justified for other reasons. For example there was no need in the recent stamp duty changes to increase the deficit by nearly a billion pounds, except to buy votes from the richer voters.
January 31, 2015
If one runs up debts that cannot be repaid then it normally becomes a question of asset valuation and sale. Greece has no shortage of islands that it could sell to the Germans. Crete and Cyprus could be useful investments, particularly if, as at present, relations with Russia continue to deteriorate. What the Germans paid for in blood in 1941, they could acquire by other means in 2015.
January 31, 2015
Max Dunbar:
‘Greece has no shortage of islands that it could sell to the Germans.‘
Cheeky!
Your suggestion would at least settle the perennial sun-lounger question.
February 1, 2015
There may be some mineral wealth around those islands:
http://www.globalresearch.ca/the-new-mediterranean-oil-and-gas-bonanza/29609
Even though the oil price has dropped, it’s still a fuel and chemical feedstock. Do we have a European directive on this yet?
February 1, 2015
Many Greeks would consider your comment to be in very poor taste. The 1941 blood was mainly Greek in any case. And 2015 Germany, for all its economic faults, is not 1941 Nazi Germany. The national allegiance of the Greek islands is entirely a matter for the inhabitants of those islands. They cannot be bought or sold!
Nevertheless, there is more serious point in your comment. If Germany is requiring Greece to pay its debts, Greece has to pay in something other than Euros, as it clearly doesn’t have anywhere near enough.
Therefore it has to pay in real goods and services. Tourism. Olives. Feta cheese. Shipping. Whatever Greece makes, Germany needs to buy to enable the debt to be settled. And it needs to buy more from Greece than it sells to Greece. That way Greece ends up with the euros, which pays the Greeks for growing the olives, and also enables the Greeks to settle their German debts.
The same goes for Spain, Italy etc. In other words German debts get repaid when it decides to accept real goods and services instead of euros.
January 31, 2015
Yes. Who wants to be at the mercy of creditors? How can they possibly care more about a population than its elected government?
I note that left-wingers give lip-service to the need for a generous state expenditure and for public ownership but, as Tony Benn’s recent Will has shown, he preferred to reduce tax liability on his estate and to leave as much as possible in the private hands of his family. If the darling of the left makes a considered decision to pay less tax, what does this tell us about the contradictoriness of the socialist position?
January 31, 2015
It seems apparent that a nation whose government sinks into debt is also deeply corrupt. While the poor and the honest get poorer you see men in Amani suits driving around in leather seated shiny cars flaunting their great wealth and striking fear into the hearts of all locals who see them. It is hard to know how a country can shake off such deeply entrenched corruption when those in charge of the government cheque books are the ones in the silk suits. Maybe it was always so in Southern Europe.
January 31, 2015
I never ceased to be baffled by the ways those on the left seem to think they can apparently borrow more and more and more, and nothing will ever happen in any way shape or form.
It just seems contrary to rational thinking. If you borrow money at some point you will either pay it back directly, or indirectly – high borrowing costs, inflation etc.
January 31, 2015
Should the state assume that is ultimately entitled to all income and capital, leaving the individual with as great or small proportion of assets as the state elects? Should the state have to justify what it takes in the form of tax and future obligation (borrowing)?
The former has been conventional wisdom for years and there is no sign of it changing.
January 31, 2015
Was the motivation to lend to Greece altruistic?
A father may lovingly lend or give to his daughter. National Institutions have lent money to individuals well above their immediate and middle term capacity to pay back the whole sum. In fact, they geared their lending to an ongoing indebtedness with the very amount still owed adjudged for their own borrowing as an asset.
Even sporadic non-payment provided the creditor counter-intuitively with greater assets as the interest on the amount owed increased and in effect became a loan which the debtor could not have legitimately applied for and got ( A saga known throughout the financial “industry”. )
An even better grab-and-run tactic by creditors was is to lend money for car purchase knowing that failure to pay up would lead to “consolidation” of the initial loan…and increased “assets” by the creditor or, confiscating the car, selling it off ridiculously cheap by auction, getting a ” lump” sum as a result with the remainder still owed, plus interest by the debtor.Double and triple whammy. And in the UK this is still LEGAL.
Greece objects and refuses its ports and other infrastructure to be auctioned off, as the previous government intended ( privatised ) and sold dirt cheap when Greece is on her knees. Bravo! A lesson there for the the UK government where the philosophy of the spiv is still regarded as “Best Practice “.
Credit card companies backed by the banks and worldwide institutions still very much prefer the bad-payer to one who clears his monthly balance in full. The regulatory regime of the UK persists in allowing this foul practice.
The bottom line is:
1. No-one in the financial world lent Greece money for the joy of giving.
2. Institutions whether they take the form of nation states or EU unelected committees should profit or be allowed to threaten to take profit from making bad loans to Greece
.
3. Who last year and the years before, in the financial world, considered Mr Greece credit worthy? Answers please on the back of a shirt button.
One can see by the immediate “privatisation” option offered to Greece not to repay but to merely service its debts that the name of the game is robbery most foul.
January 31, 2015
Straw man arguments there by JR. āThere are some who think it is always caring for the state to spend more.ā OK some nutters think that, but a large majority on the political right and left, and Keynsians and Montarists all recognise there are limits to ācaringā expenditure.
āThere are others who think that it is always good for an economy for the state sector to run large deficits.ā Again, only nutters think that.
January 31, 2015
Lots of different posts on the same point today. I think it’s all fairly straightforward. You borrow what you can afford (if you need to) in order to either buy something you can’t afford to buy outright, or in order to invest and make more money than you originally borrowed (and the interest of course).
Debt = sometimes OK, sometimes bad (if something happens, such as a recession, which means repayments will be difficult).
Defecit = bad. Stop being greedy and living beyond your means. Simple.
January 31, 2015
You forgot about inflation for elites assets as well as devaluing the currency with QE then comes over borrowing and then the interest. 60% of the pounds value gone in the last 25 years. If i remenber 8$ to the pounds after the second world war, now 1.50$ to the pounds, soon it will be 90 cents to the pound and they have lost as much value as us on the dollar in the last few years. i think dollar has lost 98 cents since 1913. so were will you be in 25 year time. In london in the early 1951 you could buy a street of houses for 10.000 pounds, today one house cost a min of 400,000 pounds.
January 31, 2015
Given Greek history (Modern, that is) Brussels should have known that they were an economic fruit and nut case. Yet they still went ahead, believeing the ……numbers from Goldman Sachs and received them into the Eurozone AND lent them bundles of new euro in the process.
Greece, true to form, went on a wild spending spree plastering the new euro on the walls of the public sector and buying votes by increasing state pensions. I think very little actually went to Greek exporting companies or manufacturing – the Private Sector, so they ended up in the mire again for the umpteenth time since the war. But Brussels, not wishing to lose face over their disastrous decision, bailed them out again. And then enforced a cruel austerity package that has laid waste to Greek employment. Not that it did not need such a cull in the Public Sector. However, those laid off had nowhere else to go for the private sector was decimated too and poverty became rife on the streets.
Greece cannot improve under the Euro currency – they must revert to their own independent Drachma and let the markets set its level. It will make them very competitive and only then can they begin to get back on their feet. As for their debt pile? Well that will have to wait a decade or three before that can be addressed.
January 31, 2015
1.34 on the 10 year bond, still away to go to 1.00 per cent, cannot catch the germans 0.27 on the 10 year bond. i am waiting to see you divide a penny in 25 years time that 99.2 lose in value of the pound as the pound will worth 0.8 of a penny in 2040.
if only there was some intelligence, you are a form banker and finance man and stand right behind this policy.
January 31, 2015
I believe Tyneside is a Labour hotbed. After 13 years of Labour administration were the “Working classes” they any better for it?
Labour borrowed and spent like there was no downside. Ploughing Ā£Billions into hare- brained schemes to feed their benefit-claiming clientele at the expense of the working population. But what good did that do for anyone? Apart from those who elected to drop out of their jobs and instead, rely upon benefit payments to feed their families.
These folk are always going to vote for the party that gives them the most and who could argue with that approach? Especially when there are many mouths to feed.
Which is why I believe that (Horror!) all claimants should be excluded from the electoral rolls. Similarly, the doomed NHS.
Hopefully, that would stop ALL parties from using OUR money as bribes.
January 31, 2015
Well do we remember the lesson of Prudence – Prudence Brown? For two years he ran the economy along the Conservative plans, then all hell broke loose as he borrowed and spent like a crazed man. The biggest boom followed by the biggest bust in our history was the result, hard to believe that the UK would now vote for “The two ‘Eds” once again!
January 31, 2015
“There are others who think that it is always good for an economy for the state sector to run large deficits.ā
Would you be including me? Because actually I don’t. Several reasons:
1) If inflation is too high then the state sector deficit needs to be reduced.
2) If the economy is running as surplus of exports over imports and there is neither net saving and de-saving occurring then the government needs to run an equal surplus in its budget too.
3) If there is a situation of equal trade, and the population (companies and individuals) are borrowing (ie de-saving) and saving large amounts of money, then the government needs to run a surplus equal to the de-saving to prevent inflation.
I’d just make the point that of the current budget deficit of Ā£100 billion, approximately Ā£85 billion is to cover the deficit in trade. So any attempt at reducing the state deficit by cutting spending and raising taxes is likely to be counterproductive – as I think George Osborne has discovered . Yes, for a short period, the deficit in trade could be covered by private sector borrowing and spending ie creating a credit bubble. But that wouldn’t work for long and a damaging recession would surely follow.
So, if their is a genuine desire to reduce the state deficit the the other deficit ie trade needs to be looked at too. You can’t have a low state deficit and a high trade deficit. It just isn’t possible for more than a year or so.
January 31, 2015
Should be:
…. borrowing (ie de-saving) and spending large amounts of money….
January 31, 2015
Interesting perspective comparing the UK to Greece. Not sure there’s that much connection as the economies are so very different, but your arguments seem confused even so.
10 year borrowing rates for the UK government went below 1.4% this week, the lowest ever.
If, as you say, high interest rates are an indication of fiscal profligacy and a government borrowing too much, then the lowest borrowing rate ever is surely an excellent indication that the government could easily afford to borrow much more with few problems? If financial markets really were worried about a Greek style debt implosion, the government wouldn’t be able to borrow at 1.4%.
But then you seem to be arguing that somehow the UK government can’t borrow more without a huge risk in debt getting out of control and interest rates spiking. Given where interest rates are, this is the last risk anyone in the UK should be worrying about.
Are you sure you’re really worrying about the right things?
February 1, 2015
Jon,
If, as you say, high interest rates are an indication of fiscal profligacy and a government borrowing too much, then the lowest borrowing rate ever…
That’s a good point to notice. The problem with this idea of borrowing is that ignores the question of where money comes from in the first instance ie Where does it come from before it can be “borrowed.”
If we view government “borrowing”, and spending, more as money creation, and taxation as money destruction we can then see that this common view actually has things backwards.
So, therefore the more money that is created by government, the more money accumulates in the high st banks’ reserve accounts at the BoE. Therefore this excess tends to depress interest rates rather than raise them, which ties in with what you’ve noticed about lowest interest rates ever.
The tendency is for interest rates, left to themselves, to fall to zero. Government intervention of course can then raise them to whatever level it wishes.
February 1, 2015
The UK’s debt mountain is about to explode in our faces.
February 1, 2015
“….state spends and borrows too much even with its own currency”. Never a truer word was spoken ! Shame our parliaments in Britain do not think it is talking about them !
Our debt is Ā£2.98 trillion and growing because our deficit has not been got rid of, it is astonishing how MPs can aim arrows at other countries but never look in the mirror !!
We are travelling to an equally unstable and unsustainable situation as the rest of the global economies. Governments seem to think that money grows on trees when they are in government even though when they were ordinary citizens they knew this was wrong.
February 2, 2015
We’d be Ā£7bn richer if we hadn’t bailed out Southern Ireland, how is that repayment going? How much of it has been paid back. We’re prudent, they set uncompetitive corporation tax rates to attract businesses from our shores yet we still bail them out when they overspend to our detriment.
Our own debt is strangling our ability to sort out A&Es. If we spent more money on the top 5% of intelligent children instead of dumbing down their education in Academies we might get somewhere in the future. Our country isn’t run by strong Alpha male and females like Merkel we seem to cave in on everything.
February 3, 2015
The UK National debt is 90% of GDP. So how does that compare to our own personal levels of debt?
Its like someone who has an after tax income of Ā£40k , or a before tax income of more like Ā£60k, having a mortgage of Ā£36k. OK that person may rather not have it, but it is hardly a reason for them to lose any sleep! Many young people could only dream of having such a low ratio of debt to income. Not to mention the dream of having such low levels of interest payments on loans.
I know I’m breaking my own rule of comparing government finance to personal or household finances here. But if everyone else likes to do that then I thought I might too. Just this once!
Reply GDP represents the total incomes of all of us, not just of the government! You need to compare state debt with tax revenues, not with GDP to make a fairer comparison. National debt is around twice tax revenues, excluding pensions.