Things don't sound too good for the UK

Discussion in 'Politics, Religion, Social Issues' started by eric/, Mar 12, 2013.

  1. eric/ Guest

    eric/

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    #1
    I've been predicting for a while now that the UK is in deep doo-doo. More and more articles keep popping up supporting this position:


    Link


    See it's one thing to have your currency start losing a bit of it's value. It's a whole different ballpark when your currency loses value and you don't start selling more, cheaper goods.

    What the heck is the UK going to do to fix this problem?
     
  2. VulchR macrumors 68020

    VulchR

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    #2
    We can start by voting out the cesspit of a government and electing people who are pragmatic.
     
  3. eawmp1 macrumors 601

    eawmp1

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    #3
    It is rare a pragmatic person runs for elected office. It's not pragmatic.
     
  4. jeremy h macrumors 6502

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    #4
    Don't worry Eric you're not the only one. (There's around 60 million others who've been predicting it for quite a while.)

    In my opinion this goes way back. It's not the fault of a single government but of multiple governments since the 70's. Two of our supposed greatest assets have been anything but... North Sea Oil bailed us out then but it prevented reform (it was the easy option to rely on it) and the city has turned us into what appears to me to be a gulf state heavily dependent on a single source of income.

    There's been a misreading (not just confined to the UK) of the future over the years too. During the 80's and 90's we de-industrialised to prepare us to become a leading service provider. A middleman effectively. Technology though is stripping out middleman functions everywhere and service offerings can relocate in ways that were inconceivable 20 years ago. It's becoming obvious that our politicians (who these days seem to have no experience other than politics) backed the wrong horse.

    How we get out of it? I don't think there's any magic solutions - we'll need to reduce the influence of the City and slowly try and rebuild our export industries. It'll take years and we'll all suffer here during that time.

    I think things will change eventually. It wasn't that long ago that everyone was saying that Germany looked like the sick man of Europe (they were clever enough to reform while everyone else was in a boom) and China won't always be the ultra low cost supplier etc etc
     
  5. RSL macrumors regular

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  6. eric/ thread starter Guest

    eric/

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    #6
    Thanks for your insight.
     
  7. Happybunny macrumors 68000

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    #7
    The key difference was that Germany remained a manufacturing economy, while the UK went for Financial services (the alchemy of modern times).

    The problem is all these factors were built up over years, and will take years to correct. I think that to many people think that there is a simple quick way out of our present situation. This includes the EURO zone, and Europe in general.
     
  8. skunk macrumors G4

    skunk

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    #8
    Pragmatic is such a difficult word, don't you think? What does it mean?
     
  9. Apple fanboy macrumors P6

    Apple fanboy

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    #9
    Only if some stand. I didn't vote for the coalition, but I didn't vote for Labour either. I think UK politicians are too far removed from everyday life. You only have to look at the expenses or penalty points scandals to see what politicians think is appropriate behaviour.
    Lets get rid of them all and start agin! Up the revolution!
     
  10. Eraserhead macrumors G4

    Eraserhead

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    #10
    Unless you happen to live in Brighton and Hove, Scotland or Wales your vote was essentially wasted then.
     
  11. Dmunjal macrumors 65816

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    #11
    What austerity?

    http://www.adamsmith.org/blog/tax-spending/savage-spending-cuts

    This doesn't look like austerity to me.

    It's like the sequester here in the States. Spending will actually go UP next year even after the sequester. All we're doing is slowing down the growth of spending.
     

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  12. vrDrew macrumors 65816

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    #12
    Then you aren't very good at interpreting economic graphs.

    The graph shows gross spending between 1997 and 2015 in constant 2005 Pounds. But it completely ignores the growth in GDP that takes place over that time period. And GDP increased more than 24% between 1997 and 2010 - hence the steadily upward marching blue columns.

    (Its worth noting that, during this period, per capita GDP growth was higher in the UK than in almost any other industrialized country, including the US. Maybe the Brits aren't completely clueless...)

    The flat-lining of Government spending from 2010 onwards does represent "austerity" in the very real sense that, in order to make up for increased unemployment and other structural costs associated with a time of high unemployment, the Government is slashing the budgets of everything from the Armed Forces to Education and the Arts.

    A Government cannot cut its way out of a recession. (Gun owners can't shoot their way out of one either, but US firearms sales figures might suggest some people believe otherwise.)
     
  13. eric/ thread starter Guest

    eric/

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    #13
    Well to be fair people aren't going out and buying guns because of the recession.

    Where did that 25% growth in GDP come from? manufacturing? Or something else?
     
  14. vrDrew macrumors 65816

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    #14
    Well I hope it doesn't mean they're buying them because we have an African-American President....

    The UK's economic growth in the 1990s was driven, to a very large extent, by the same things that drove US growth: The financial sector, and the "wealth effect" of rapidly growing housing values. Only in the UK it was much worse. And when housing prices collapsed, people were no longer able to use their house equity as a "piggy bank" to finance their overextended lifestyles.

    The UK didn't have quite as bad a foreclosure mess as the US: Banks there tend to be somewhat more conservative in their lending practices. But more of the economy is concentrated in the finance/insurance sector.
     
  15. Dmunjal macrumors 65816

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    #15
    That's a big reason for our woes. Again courtesy of the the easy money policy of the Fed. [​IMG]
     
  16. Eraserhead macrumors G4

    Eraserhead

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    #16
    That's because Labour did a good job. Blair was one of the best leaders in the world, and Brown wasn't actually that bad.

    Their only real flaws were the Iraq war and not building enough houses.
     
  17. RSL macrumors regular

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    #17
  18. Dmunjal macrumors 65816

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    #18
    I'm sure some departments are having budget cuts but again the overall spending hasn't gone down so other departments are spending more. It may have gone down in terms of per capita or even GDP. But the actual pounds spent by the government hasn't gone down.

    What else would you recommend? More spending? Where would that money come from? Taxing rich people? As we've seen in France and other places, they leave and take their money elsewhere. It doesn't generate the revenue expected. So, that leaves going into more debt as Keynesians would suggest. But most developed countries are already in too much debt. That's why we're in this mess. Even if we can go into more debt, is that wise? Who pays back the interest? All we're doing is borrowing from the future and putting the debt on our children and grandchildren.

    I agree that there are no easy options. The fact is that most developed countries have spent more than they should have based on their economic output. This has been going on for decades and and we've finally hit a wall.

    Austerity hurts. It is supposed to hurt. It is supposed to right the ship and bring revenue and spending back into balance. The pain may last a few years but it is necessary for long-term success.

    Going into more debt feels good in the short-term just like taking a drug might. But long-term it kills the patient.
     
  19. VulchR macrumors 68020

    VulchR

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    #19
    True enough it is hard to define. To me 'pragmatic' means willing to guide policies based on available evidence rather than some extreme world view. IMO too many politicians are evidence-resistant.

    Agreed. They're even worse than US legislators. I still fail to understand how a MP thought it was appropriate to use taxpayers' money to buy a floating duck island. There is only one alternative: vote the bastards out!
     
  20. RSL macrumors regular

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    #20
    1. "As we've seen in France and other places, they leave and take their money elsewhere."

    Which people have taken their money out of France? I know a few cases come up in the media, but really a few people moving here and there is not a macro economic problem. If there is capital flight, let's see the figures.

    2. "Taxing rich people?... It doesn't generate the revenue expected."

    Do you know what the highest tax rates were from about 1945 to 1979? Way higher than they are now. And guess what? We were doing much better economically.

    3. "most developed countries are already in too much debt. That's why we're in this mess."

    We're in an economic slump, which has been aggravated by austerity. We are NOT in a debt crisis. Look at the interest rates on the debt from the US, the UK, or France. They are historically low. I don't think investors would be throwing their money at treasury bills if they felt the country couldn't pay it back.

    4. "Even if we can go into more debt, is that wise?... All we're doing is borrowing from the future and putting the debt on our children and grandchildren."

    I don't think our children and grandchildren will be grateful for a future of unemployment and economic devolution. The downward spiral of rising unemployment, rising bankruptcies, and deindustrialisation, is not something worth pinching pennies for.
     
  21. OnceYouGoMac macrumors 6502

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    #21
    Can't the UK government just call Ocean Finance and consolidate all their debts into one affordable monthly repayment? :D
     
  22. Dmunjal macrumors 65816

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    #22
    Those are the cases you've heard of in the media. If you're a rich person, even if you can't leave the country, you take your investments to countries that have favorable tax conditions. Even here in the US, companies have trillions of dollars off shore. Why is that? It's because they can lower their corporate taxes compared to the rates in the US. Even at the individual level, people alter their behavior because of taxes.

    Correlation doesn't equal causation. You should look back at history before you make comments like this. No matter how high taxes were in the 40s, 50s, 60s, and 70s, the actual tax collected as a percentage of GDP was always the same, around 15-20% (average 18.1%).

    http://www.heritage.org/federalbudget/current-tax-receipts

    Austerity is being forced on countries by bond vigilantes who are worried about their principal and are demanding higher returns. These are countries who don't have their own central banks. Countries that have their own central banks (US, UK, Japan, EU) are able to print money (QE) to finance their bond markets and keep rates low. As I said before, the Fed is buying 90% of all Treasury debt. The UK and Japan are doing the same. Rates are low for that reason and that reason alone. Without this QE intervention, rates would be MUCH higher. The problem is debt and we're hiding it with QE.

    As I said, we have a broken economy in the developed countries based on debt. Adding more debt may fix the problem temporarily but will risk a worse outcome in the future. Austerity is tough medicine but needs to be employed to put debt and deficit back into balance.

    Unfortunately, we've waited to long to get to take these measures. Imagine if we took austerity measures in 2001 or 2008 instead of adding on more debt? We may have suffered a downturn but would have a more lasting recovery.

    For those in the Keynesian camp, at what point do you have too much debt? If it is unlimited, why not just print $1M for every man, woman, and child right now and solve the problem immediately? If that's too much, what number is the right amount? Who decides that? Is there someone smart enough to make that decision? Ben Bernanke? The guy who missed the financial crisis? We're putting our faith in bankers who are the ones who caused this mess in the first place.
     
  23. RSL macrumors regular

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    #23
    You made a claim about people leaving France because of taxes. Let's see the figures.

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    You're contradicting yourself. You said taxing the rich will cause them to flee (like in France :rolleyes:) and will reduce revenue. Oh wait, revenue is the same as when the top tax rate was over 70%!

    ----------

    Another false statement. Rates on some EU countries (e.g. France) are historically low and they can't print money since they don't control the ECB (basically, Germany does and is opposed to printing).

    The truth is that investors are buying bonds because they're safe.
     
  24. Dmunjal macrumors 65816

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    #24
    http://www.telegraph.co.uk/finance/globalbusiness/9261905/High-earners-say-au-revoir-to-France.html

    How is that a contradiction? The reason that actual rates don't change appreciably when marginal rates go up is because people changed their behavior. They flee, they invest less, they look for tax shelters, etc.

    The only place where rates are low is where there is a Central Bank. Every where else rates are going higher. That is because of Central Bank intervention via QE. How can say investors are buying bonds because they're safe when they're only 10% of the market (in the US)?

    As for France and Germany, they are the major influencers in what the ECB does and the ECB does buy a lot of their debt.

    One final question? Why are all major Central Banks engaged in QE? Why are they printing so much money to buy their country's debt? They do it to KEEP rates artificially low. Bernanke admits as much. It is disenguous to think that rates would not be higher without CB intervention.
     
  25. skunk macrumors G4

    skunk

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    #25
    Politicians guide policies based on their perception of the available evidence, coloured by a particular world view. As do we all.
     

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