DJ Barry Hammond

Politics Thread (encompassing Brexit) - 21 June 2017 onwards

2,118 posts in this topic

41 minutes ago, toddybad said:

It doesn't, i assumed mattp likes the odds of winning an esther rantzen 

That's probably because anything is better than the ball and chain.

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3 hours ago, toddybad said:

What on earth are you on about?

The reason the tories lost seats in the election is that they had absolutely nothing positive to say. The only time any tory mps show positivity is when the brexiteers try to convince everybody they haven't just spun a bottle in a circle of 1 hot blonde and 5 esther rantzen's.

I'm on about the speech I posted. This was on Thursday which was absolutely nothing to do with the election. 

 

No idea why you have confused that with the campaign as I clearly stated it was from MP who was from the new intake.

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http://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm

 

But is there really a defensible case for countries like Germany, the United Kingdom, or the United States to pay down the public debt? Two arguments are usually made in support of paying down the debt in countries with ample fiscal space—that is, in countries where there is little real prospect of a fiscal crisis. The first is that, although large adverse shocks such as the Great Depression of the 1930s or the global financial crisis of the past decade occur rarely, when they do, it is helpful to have used the quiet times to pay down the debt. The second argument rests on the notion that high debt is bad for growth—and, therefore, to lay a firm foundation for growth, paying down the debt is essential.­

 

It is surely the case that many countries (such as those in southern Europe) have little choice but to engage in fiscal consolidation, because markets will not allow them to continue borrowing. But the need for consolidation in somecountries does not mean all countries—at least in this case, caution about “one size fits all” seems completely warranted. Markets generally attach very low probabilities of a debt crisis to countries that have a strong record of being fiscally responsible (Mendoza and Ostry, 2007). Such a track record gives them latitude to decide not to raise taxes or cut productive spending when the debt level is high (Ostry and others, 2010; Ghosh and others, 2013). And for countries with a strong track record, the benefit of debt reduction, in terms of insurance against a future fiscal crisis, turns out to be remarkably small, even at very high levels of debt to GDP. For example, moving from a debt ratio of 120 percent of GDP to 100 percent of GDP over a few years buys the country very little in terms of reduced crisis risk (Baldacci and others, 2011).­

 

But even if the insurance benefit is small, it may still be worth incurring if the cost is sufficiently low. It turns out, however, that the cost could be large—much larger than the benefit. The reason is that, to get to a lower debt level, taxes that distort economic behavior need to be raised temporarily or productive spending needs to be cut—or both. The costs of the tax increases or expenditure cuts required to bring down the debt may be much larger than the reduced crisis risk engendered by the lower debt (Ostry, Ghosh, and Espinoza, 2015). This is not to deny that high debt is bad for growth and welfare. It is. But the key point is that the welfare cost from the higher debt (the so-called burden of the debt) is one that has already been incurred and cannot be recovered; it is a sunk cost. Faced with a choice between living with the higher debt—allowing the debt ratio to decline organically through growth—or deliberately running budgetary surpluses to reduce the debt, governments with ample fiscal space will do better by living with the debt.­

 

Austerity policies not only generate substantial welfare costs due to supply-side channels, they also hurt demand—and thus worsen employment and unemployment. The notion that fiscal consolidations can be expansionary (that is, raise output and employment), in part by raising private sector confidence and investment, has been championed by, among others, Harvard economist Alberto Alesina in the academic world and by former European Central Bank President Jean-Claude Trichet in the policy arena. However, in practice, episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1 percent of GDP increases the long-term unemployment rate by 0.6 percentage point and raises by 1.5 percent within five years the Gini measure of income inequality (Ball and others, 2013).­

 

In sum, the benefits of some policies that are an important part of the neoliberal agenda appear to have been somewhat overplayed. In the case of financial openness, some capital flows, such as foreign direct investment, do appear to confer the benefits claimed for them. But for others, particularly short-term capital flows, the benefits to growth are difficult to reap, whereas the risks, in terms of greater volatility and increased risk of crisis, loom large.­

 

In the case of fiscal consolidation, the short-run costs in terms of lower output and welfare and higher unemployment have been underplayed, and the desirability for countries with ample fiscal space of simply living with high debt and allowing debt ratios to decline organically through growth is underappreciated.

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5 minutes ago, toddybad said:

Austerity makes no economic sense. I'm going to believe the imf over mattp and webbo.

Yeah because you were on the fence until that article :giggle:.

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2 minutes ago, Strokes said:

Yeah because you were on the fence until that article :giggle:.

That article is a year old.

I actually got rid of that comment to try to avoid being confrontational but my point really was that if they can come up with good reasons for austerity based on the findings of serious and neutral economic bodies then we can compare and contrast rationales properly.

They won't though, they'll either ignore the post or bleat on about the very things the imf say they're wrong to bleat about.


Edited by toddybad
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9 minutes ago, toddybad said:

That article is a year old.

I actually got rid of that comment to try to avoid being confrontational but my point really was that if they can come up with good reasons for austerity based on the findings of serious and neutral economic bodies then we can compare and contrast rationales properly.

They won't though, they'll either ignore the post or bleat on about the very things the imf say they're wrong to bleat about.

Whether Austerity is the right policy going forwards, I have my doubts (not that this is really Austerity). However it was needed in 2010 until very recent. When the coalition took control from Labour the 'deficit' was 10% of the GDP, that is just unsustainable, it had to come down.

Now with the inevitable downturn of brexit, I do wonder whether we need to artificially stimulate the economy with big investment.

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Just now, Strokes said:

Whether Austerity is the right policy going forwards, I have my doubts (not that this is really Austerity). However it was needed in 2010 until very recent. When the coalition took control from Labour the 'deficit' was 10% of the GDP, that is just unsustainable, it had to come down.

Now with the inevitable downturn of brexit, I do wonder whether we need to artificially stimulate the economy with big investment.

Government departments were hit by average cuts of over 20%, it was real austerity. 

 

There are various choices to cut a deficit: cuts, tax rises or growth. Cuts was chosen for political reasons.

 

The imf really sum it up.

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I agree with the IMF but only the first few years of the coalition were real austerity, they did quite a bit of damage to the economy but ended after a few years. 

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2 hours ago, toddybad said:

Government departments were hit by average cuts of over 20%, it was real austerity. 

 

There are various choices to cut a deficit: cuts, tax rises or growth. Cuts was chosen for political reasons.

 

The imf really sum it up.

And yet we had very decent growth compared to similar countries so the argument doesn't really stack up.

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1 hour ago, Webbo said:

And yet we had very decent growth compared to similar countries so the argument doesn't really stack up.

It means we could have had better

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15 minutes ago, toddybad said:

It means we could have had better

We could have also had worse.

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We want growth! 

 

Government: there you go! 

 

We want more growth! 

 

When would it be enough? :rolleyes:

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2 minutes ago, Innovindil said:

We want growth! 

 

Government: there you go! 

 

We want more growth! 

 

When would it be enough? :rolleyes:

When 75% of the country wasn't still behind where it was 10 years ago -  like other countries that are similar to the uk.

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