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It turns out, the maths behind austerity is wrong!
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featherstick



Joined: 05 Mar 2010
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PostPosted: Sat Apr 20, 2013 6:00 pm    Post subject: It turns out, the maths behind austerity is wrong! Reply with quote

http://www.bbc.co.uk/news/magazine-22223190

Very Happy
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RenewableCandy



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PostPosted: Sat Apr 20, 2013 7:14 pm    Post subject: Reply with quote

Delightful, isn't it Very Happy ?

I mentioned another article covering it, in the Budget 2013 thread.
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kenneal - lagger
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PostPosted: Sun Apr 21, 2013 5:01 am    Post subject: Reply with quote

In Energy and the Wealth of Nations. Understanding the Biophysical Economy. Hall, Charles A. S., Klitgaard, Kent the authors call into question economics theory as most is not peer reviewed and most papers are just the thoughts of their writers. Even economic models are not backcast to check that they work against existing data sets. As this case shows, the whole of economic theory is on very dodgy ground.
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peaceful_life



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PostPosted: Sun Apr 21, 2013 11:21 pm    Post subject: Reply with quote

http://www.guardian.co.uk/commentisfree/2013/apr/21/no-need-for-economic-sadomasochism?CMP=twt_gu

Print it.
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kenneal - lagger
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PostPosted: Mon Apr 22, 2013 3:44 am    Post subject: Reply with quote

It would seem that the left are jumping on this mistake as an excuse to avoid getting the country's books in order. It seems to me to be common sense that when a country reaches a certain level of debt people will refuse, both at a personal and national level, to increase that debt as they know that they will be unable to repay it.

That level will occur at a lower level of debt to earning ratio on a personal level as people will be more careful with their own expenditure than with the nation's as they have a more direct exposure on personal debt to the consequences if they can't repay. As a result of a large scale lowering of personal expenditure a recession is not just likely but a certainty

Yes, a country can get away with a higher level of debt because the debt can be inflated away, but this involves robbing future generations of their chance for some wealth. Future generations have to pay the debt, even if at a reduced level, that the present generation build up.

The left wing mantra of "Spend! Spend! Spend!" is basically stealing the bread from from future generations to give cake and bread to the present generation. I see that as immoral and the use of this mistake as an excuse to carry on spending beyond our means as equally immoral.

There is a big difference between a government printing money for capital expenditure, and living off the tax earnings from that investment, and printing money to pay for current account spending. the former is mildly inflationary whereas the latter is highly inflationary and theft from future generations.
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Little John



Joined: 08 Mar 2008
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PostPosted: Mon Apr 22, 2013 3:35 pm    Post subject: Reply with quote

kenneal - lagger wrote:
It would seem that the left are jumping on this mistake as an excuse to avoid getting the country's books in order. It seems to me to be common sense that when a country reaches a certain level of debt people will refuse, both at a personal and national level, to increase that debt as they know that they will be unable to repay it.

That level will occur at a lower level of debt to earning ratio on a personal level as people will be more careful with their own expenditure than with the nation's as they have a more direct exposure on personal debt to the consequences if they can't repay. As a result of a large scale lowering of personal expenditure a recession is not just likely but a certainty

Yes, a country can get away with a higher level of debt because the debt can be inflated away, but this involves robbing future generations of their chance for some wealth. Future generations have to pay the debt, even if at a reduced level, that the present generation build up.

The left wing mantra of "Spend! Spend! Spend!" is basically stealing the bread from from future generations to give cake and bread to the present generation. I see that as immoral and the use of this mistake as an excuse to carry on spending beyond our means as equally immoral.

There is a big difference between a government printing money for capital expenditure, and living off the tax earnings from that investment, and printing money to pay for current account spending. the former is mildly inflationary whereas the latter is highly inflationary and theft from future generations.
This country is in the economic crapper. Anyone who denies that is delusional. Even more so in the peak oil community since we are all well aware of the underlying intractability of the prospects of renewed growth to enable our economy to grow out of this crisis.

Consequently, the only pertinent question that remains is how the coming reduction in wealth is to be distributed; equitably or inequitably. Anyone who thinks the current "austerity" measures are designed to allocate the pain equitably is equally delusional. They have been designed by the rich and powerful such that the rich and powerful may carry on with BAU.

Nobody in the political establishment is telling the truth.
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Lord Beria3



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PostPosted: Mon Apr 22, 2013 6:30 pm    Post subject: Reply with quote

Actually, the end of growth would mean that the real level at which debt becomes a threat to a national economy will be much lover than 90%. Indeed I would argue that anything over 25% of your overall economy is a danger in a era of at best sluggish growth.

And that debt spending should be focused on green orientated and infrastucture type projects, not welfare for example (which will be provide no future income or returns).

Naturally, this means huge changes to our spending habits, something we have barely started. Inflation can help a lot, but this tends to hit the poorer classes more than the rich. Probably why they are doing it!

Saying that, the wealth destruction in the coming decades will be brutal for the rich. The Left argument that somehow the rich will be immune from the end of growth is just silly in my opinion.
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raspberry-blower



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PostPosted: Mon Apr 22, 2013 9:20 pm    Post subject: Reply with quote

Lord Beria3 wrote:


And that debt spending should be focused on green orientated and infrastucture type projects, not welfare for example (which will be provide no future income or returns).


The welfare that should be cut is that which is currently generously given to all the corporate interests, not to those who are struggling below the poverty line because there isn't the work for them. Period.

Anyhow, here's a question that's worth discussing:
What do we want to grow into?
Ilargi wrote:
The only good thing about all this is that if and when it becomes clear that there is no growth left in the system, all its one-dimensional advocates, from both the Spend! and the Cut! parties, will disappear into a great void. They have no idea what to do without growth. There is no economics class that teaches them, and they don't have the brains to come up with an answer themselves. Indeed, perhaps it's even true that a "not necessarily growth" situation, simply of its own accord, selects for other "leaders". That power hungry psychopaths, in all the various degrees to which they float to the top of the dungheap, are wiped out and alienated by such a situation.

That could be a very good thing. It's on the way there, however, that we will see unimaginable damage, mayhem and bloodshed. The forever and always growth classes have an iron grip on everyone's lives. If only because everyone believes them. Still, just because they can't change their ways and views doesn't mean you can't. You can see quite easily that, in a material sense, you have more than enough already. And many of you have clued in to the destruction ever more growth brings to your children's living world (not to mention their brains). Unfortunately, quite a few then fall for the "more growth, but more greener" delusion. Or some steady state one (we don't do steady, we don't stand still).

When you get down to the heart of it, the only reason we need more growth is to pay off our debts. Which we owe largely to the same small group of rich, psychopathic and powerful that incessantly repeat the "need for growth" message, and makes sure it's the only message available out there. But we will have to have the discussion some day, and it won't be initiated by the people and powers that rule our societies today; that one's up to us.

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JavaScriptDonkey



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PostPosted: Wed Apr 24, 2013 10:50 pm    Post subject: Reply with quote

raspberry-blower wrote:


The welfare that should be cut is that which is currently generously given to all the corporate interests, not to those who are struggling below the poverty line because there isn't the work for them. Period.



Really?

So why am I being taxed to provide a pension for someone that already owns a house worth more than I will ever be able to afford?

70% of the benefits budget goes on pensioners - care to guess who voted in the Governments that keep that gravy train rolling?

(it isn't the corporations)
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featherstick



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PostPosted: Thu Apr 25, 2013 9:43 am    Post subject: Reply with quote

Nice to see that you agree with Steve's point that "Consequently, the only pertinent question that remains is how the coming reduction in wealth is to be distributed; equitably or inequitably".

Pensioners aren't riding a gravy train. The taxes they paid when they were earning paid for the hospital you were born in, the inoculations that kept you healthy, the school you were educated in, and the coppers that kept you safe. Now it may be that you and your family went private for all those things but my example still stands for the majority.

The fact that their house is worth a fortune is unfair but it is a factor of the consistent under-supply of housing in this country, not because pensioners have freeloaded off you or anyone else.
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PS_RalphW



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PostPosted: Thu Apr 25, 2013 11:00 am    Post subject: Reply with quote

Quote:
Really?

So why am I being taxed to provide a pension for someone that already owns a house worth more than I will ever be able to afford?


The value of a house beyond what it would cost to rebuild, and the agricultural value of the land it is built on, is entirely what the market will bear. Around my way, that is a 6 figure sum for a 1 bed flat. However,
since most people only own the home they live in, it is a stranded asset.

My mum will shortly be selling her house to pay for her care home. At current rates it will pay for 6 years of care. (4 bed detached with a reasonable sized garden). There is a good chance she will live longer than that. (I have offered to buy/build her a granny flat so that she
can live with us).

However, since I fully anticipate that the pension I have been paying for since 1984 will be worth squat by the time I retire, I am none-the-less investing (my wifes) capital into housing as the only realistic source of pension which will provide an acceptable and relatively inflation proof return. I fully expect rents to fall in real terms as we enter permanent recession, but they will probably hold up relative to average earnings, as the demographics of people to houses will change only slowly.
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Tarrel



Joined: 29 Nov 2011
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PostPosted: Thu Apr 25, 2013 1:23 pm    Post subject: Reply with quote

raspberry-blower wrote:
Lord Beria3 wrote:


And that debt spending should be focused on green orientated and infrastucture type projects, not welfare for example (which will be provide no future income or returns).


The welfare that should be cut is that which is currently generously given to all the corporate interests, not to those who are struggling below the poverty line because there isn't the work for them. Period.

Anyhow, here's a question that's worth discussing:
What do we want to grow into?
Ilargi wrote:
The only good thing about all this is that if and when it becomes clear that there is no growth left in the system, all its one-dimensional advocates, from both the Spend! and the Cut! parties, will disappear into a great void. They have no idea what to do without growth. There is no economics class that teaches them, and they don't have the brains to come up with an answer themselves. Indeed, perhaps it's even true that a "not necessarily growth" situation, simply of its own accord, selects for other "leaders". That power hungry psychopaths, in all the various degrees to which they float to the top of the dungheap, are wiped out and alienated by such a situation.

That could be a very good thing. It's on the way there, however, that we will see unimaginable damage, mayhem and bloodshed. The forever and always growth classes have an iron grip on everyone's lives. If only because everyone believes them. Still, just because they can't change their ways and views doesn't mean you can't. You can see quite easily that, in a material sense, you have more than enough already. And many of you have clued in to the destruction ever more growth brings to your children's living world (not to mention their brains). Unfortunately, quite a few then fall for the "more growth, but more greener" delusion. Or some steady state one (we don't do steady, we don't stand still).

When you get down to the heart of it, the only reason we need more growth is to pay off our debts. Which we owe largely to the same small group of rich, psychopathic and powerful that incessantly repeat the "need for growth" message, and makes sure it's the only message available out there. But we will have to have the discussion some day, and it won't be initiated by the people and powers that rule our societies today; that one's up to us.


That's a great article. Kind of reminds me that we're in a "Hitchhiker's Guide" situation here. We seem to have figured out that "the answer" is Growth, without having figured out "the question"!
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emordnilap



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PostPosted: Thu Apr 25, 2013 1:27 pm    Post subject: Reply with quote

"They have no idea what to do without growth."

Yes, that's a good article - I'd forgotten exactly where I'd read that excellent line but doesn't it just about sums things up?
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Little John



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PostPosted: Thu Apr 25, 2013 5:06 pm    Post subject: Reply with quote

featherstick wrote:
Nice to see that you agree with Steve's point that "Consequently, the only pertinent question that remains is how the coming reduction in wealth is to be distributed; equitably or inequitably".

Pensioners aren't riding a gravy train. The taxes they paid when they were earning paid for the hospital you were born in, the inoculations that kept you healthy, the school you were educated in, and the coppers that kept you safe. Now it may be that you and your family went private for all those things but my example still stands for the majority.

The fact that their house is worth a fortune is unfair but it is a factor of the consistent under-supply of housing in this country, not because pensioners have freeloaded off you or anyone else.
I'd agree with all of this except the part about under supply of houses, though that has certainly played a bit-part in the current housing crisis.

The primary reason houses prices are now at insane multiples of income in this country and elsewhere in the Western world is because a wall of credit has been thrown at them by the banks for the last thirty or so years.

However, if anyone wishes to maintain that it is all down to under supply I would refer them to the case of Bangladesh. in Bangladesh, supply is severely constricted relative to demand. However, it is also the case that the average Bangladeshi has very much less access to credit than the average UK citizen. Consequently, although the volume of the Bangladeshi market (the number of economic transaction occurring at any given time) is very high, the size of their real estate market (market size being a reflection of the average price of a property) is far lower.

Supply/demand affects the volume of a market. However, it is access to money or debt (which, in our monetary system, amount to the same thing) that affects the price of that market.
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Tarrel



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PostPosted: Thu Apr 25, 2013 5:12 pm    Post subject: Reply with quote

And unfortunately, especially in the South East, even though that supply of credit is now being severely restricted, there are enough buyers coming in from overseas to keep the prices high.
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