Politics Ed Miliband

[Wij]

Labour wasn't spending more than we could afford...

...as long as there wasn't a bust cycle in the economy. How many more times do I need to say this ?

Ed Balls keeps banging on about how the fiscal stimulus and bailout was following sound Keynesian principles about what to do when there's an economic downturn (of any kind) but for all his 'I know my Economics' bluster he never once mentions the fact that Lord Keynes also expressly stated that money should be put away in the good years to ensure you don't end up in too much debt in the bad ones.

It's a complete straw man argument saying that all economies use debt. Noone disputes that. The problem is that UK national debt as a % of GDP was already rising quite sharply in the good years 2002-2007.

Your argument that the investment (or waste depending on POV) was set to increase GDP is irrelevant. At best you're saying Labour gambled and lost.

 

[Wij]

Labour did not cause the banking collapse, you are well aware of that Wij.

From the thread in general:


Who let the banks do what they were doing ? Who missed the key Keynesian message that you put money to one side in the good times to cover the bad ? Who let levels of personal debt rise to the point where the bank can't raise interest rates even one jot as everyone will go bust ? Who let house prices rise beyond all proportion to wages ? Who was in power for 13 years while all this happened ?

Also, you're deliberately skewing the question. Most things don't just have one cause. Cause is a convenience of language. There were many conditions which helped bring about the financial collapse. Labour was at least asleep at the wheel for most of them and in other cases its decisions made the collapse and its fall-out worse.

 

[cHodAX]

...as long as there wasn't a bust cycle in the economy. How many more times do I need to say this ?

Your point is what exactly? That they did what every other G20 nation did and invested in their economy but then got caught with their pants down when the banks started to collapse?

Oh and lets be clear, this isn't a bust, it is a recession solely down to a banking collapse which is something fundamentally different. The core economies of the G20 nations were actually in pretty decent order with all registering growth right up to the day the banks started falling over. The truth is the banks got greedy, when they realised they were sat on a mountain of bad debts they stopped lending to each other. Interbank loans collapsed and Lehman Brothers etc could not borrow their way out of trouble. Of course short-selling just helped it all happen that much faster.

None of that was to do with economic output, zero, nada, nothing.

 

[cHodAX]

At best you're saying Labour gambled and lost.

All the leading nations gambled and lost, that doesn't suit your party political broadcast though. Neither does it indicate that actually all governments take the same gambles, you can trace it right back through the last 5 decades.

 

[Wij]

All the leading nations gambled and lost

Australia ?
Canada ?

Generalise much ?

 

[Bugz]

our debt spiralled out of control because of poor bank regulation and excessive risk taking on behalf of the banks.

Poor bank regulation was Labour's fault. You think excessive risk taking was the banks fault? No. It was Labour's again. They DEREGULATED banking in their terms. These absurd 100%+ mortgages were part-bank fault, part-Labour. All of this ties hand in hand with the housing bubble everyone knew about but Labour failed to act on.

 

[Wij]

Oh and lets be clear, this isn't a bust, it is a recession solely down to a banking collapse which is something fundamentally different.

Busts always have a variety of causes. Sooner or later they will come and it's the government's responsibility to ensure the economy can withstand it.

If property prices weren't wildly out of control then people could afford to pay back their mortgages. The economy was balanced on a knife-edge of debt. Home-owners, businesses and government alike could manage their debts as long as nothing untoward happened to threaten their earnings. Once a few people started to have problems the whole system collapsed like a house of cards as a system like that can only work whilst everyone has confidence that everyone else can manage their debts. You are saying of course that this is all the fault of the banks but the government knew of the situation.

Indeed, the situation of the debt rising as a % of GDP was partly due to the government believing its own hype about how great the boom was. A lot of the growth in GDP was not real growth at all but merely a bubble as everyone got too confident about the value of assets. The government treated this 'growth' as though it was a permanent feature of the economy and spent it. If it had bothered to do hard analysis of the figures it would have noticed that a lot of the money floating around was pure speculative fancy made-up numbers that would be subject to serious market re-adjustment whenever reality kicked in again. Of course no caution was applied and New Labour (along with the PIGS countries who assumed that their subsidised economies would grow forever by magic) proclaimed its economic miracle and went shopping.

 

[cHodAX]

Australia ?
Canada ?

Generalise much ?

Generalisation? Yes of course, a list is alot longer but if you insist...

France, Germany, Italy, Japan, United States, India, Brazil, Russia, Denmark, Greece, Ireland, Spain, Norway, Finland, Portugal, Austria, Sweden, Belgium, Netherlands and Switzerland.

Oh and Australia's debts are huge.

National debt to reach $1 trillion | News.com.au

 

[Lamp]

he doesn't look right

 

[cHodAX]

he doesn't look right

Kiddie cuddler? Most polititians are.

 

[MYstIC G]

Labour did not cause the banking collapse, you are well aware of that Wij.

They de-regulated the banking industry, so actually they did.

 

[cHodAX]

They de-regulated the banking industry, so actually they did.

Actually the real problems lay with the U.S. banking and finance system that allowed sub-prime debts to be bundled together and re-classified to a higher rating. Essentially state sponsored fraud, a loophole that allowed the American banks to sell worthless debt overseas as good debt. They fucked us all alot more than Labour could have even with another 13 years of power.

 

[Lamp]

Cho is correct. If you want to blame someone for instigating the crisis, blame the US bankers.

 

[ECA]

Actually the real problems lay with the U.S. banking and finance system that allowed sub-prime debts to be bundled together and re-classified to a higher rating. Essentially state sponsored fraud, a loophole that allowed the American banks to sell worthless debt overseas as good debt. They fucked us all alot more than Labour could have even with another 13 years of power.

Our government is perfectly capable of regulating our banks and preventing our banks dealing in these kind of derivatives or separating investment banks from consumer banks, something the US did in 1933 with glasss-steagal after the great depression to prevent it happening again.

Some was repealed in 1980 and the rest in 1999, and we did nothing to ensure our banks were protected.

( Brown and Blair succumbed to a classic gamblers fallacy of believing the current situation will continue forever and there won't be a downswing ).

 

[cHodAX]

Our government is perfectly capable of regulating our banks and preventing our banks dealing in these kind of derivatives or separating investment banks from consumer banks, something the US did in 1933 with glasss-steagal after the great depression to prevent it happening again.

Some was repealed in 1980 and the rest in 1999, and we did nothing to ensure our banks were protected.

Yes, repealed in America, leaving banks around the world at risk.


All Brown/Blair are guilty of is not seeing the fall coming, neither did 100 other governments who didn't change their banking laws either. Infact the Tories had 18 years to change those banking laws as well. Did they?

George Soros fucked us with short selling on Sterling in 1992, did we change those regulations to stop it happening again?

 

[Ch3tan]

Yes and sheer arrogance of their outlook cannot be highlighted more clearly than by selling off the gold reserves - and announcing they were doing so before.

It's sheer fucking madness.

As for investment into health and the police - well I don't hold much for the current state of the NHS, and that's after 13 years of labour. It's not got any better, many would say it's got worst.

As for Education? Our schools are fucking terrible, all Labour have done is try to make everyone equal, which is the worst thing you can do in education. University for everyone is their biggest failing. Common sense tells you that it should be university for those who are intelligent and committed enough, not letting everyone rack up massive debts while pissing 3 years up a wall and walking out with a meaningless degree in media.

 

[Wij]

Generalisation? Yes of course, a list is alot longer but if you insist...

France, Germany, Italy, Japan, United States, India, Brazil, Russia, Denmark, Greece, Ireland, Spain, Norway, Finland, Portugal, Austria, Sweden, Belgium, Netherlands and Switzerland.

Oh and Australia's debts are huge.

National debt to reach $1 trillion | News.com.au

I was talking about who came off badly not who already has large debts. As mentioned government debt is one aspect but also personal debt and the housing bubble. The UK did badly on all three not all the other nations did. Also, as far as those that did, 'The other boys did it too', didn't carry much weight for me in infants when I was pushing the ginger kid about and it shouldn't carry much weight in politics either.

 

[Wij]

Yes, repealed in America, leaving banks around the world at risk.


All Brown/Blair are guilty of is not seeing the fall coming, neither did 100 other governments who didn't change their banking laws either. Infact the Tories had 18 years to change those banking laws as well. Did they?

The situation was nowhere near as bad in the 80s.

 

[cHodAX]

As for investment into health and the police - well I don't hold much for the current state of the NHS, and that's after 13 years of labour. It's not got any better, many would say it's got worst.

As for Education? Our schools are fucking terrible, all Labour have done is try to make everyone equal, which is the worst thing you can do in education. University for everyone is their biggest failing. Common sense tells you that it should be university for those who are intelligent and committed enough, not letting everyone rack up massive debts while pissing 3 years up a wall and walking out with a meaningless degree in media.

Rubbish, waiting lists for most things are way down on 1997 levels. The NHS has a ton of modern equipment that the Tories had starved it of previously. Before 1997 if you needed an MRI scan and lived outside London you have an 80% chance of a 30+ miles journey. Now we have numerous MRI scanners, CT scanners in every city, large and small. Most large towns have at least one as well. They invested billions in a building program that rebuilt most of our large hospitals and turned them into modern centres of medical excellence. Where the NHS is failing so badly is at GP, dental and hygiene levels. Sadly they are the first experience most people have of the NHS.

Education? Lovely new schools with great equipment but powerless teachers and kids that have no fear of the school, parents or the state. The schools are the problem, they try damn hard but they cannot remedy the faults of society alone.

University, of man I could bitch about that one all day. Yes, way too many people going to University, running on massive debts and ending up with degrees that have no discernable use in the real world. I would cut subsidised University places in half, throw out the a-level and gcse's and find a more accurate measure of the the best. They are the ones we should be subsidising but also we should only subsidise for the skills the country NEEDS! Media studies fuckwits should pay their own way or go work for a living.

 

[cHodAX]

The situation was nowhere near as bad in the 80s.

Pardon? 1992, Black Wednesday, short selling causes a run on the pound, Norman Lamont props up the pound with £27 billion of public money. George Soros walks away with a billion and change after causing the markets to doubt the strength of our currency. Did we change the laws on short selling under that Tory government? No.

16 years later short selling is still legal, it kills Lehmann Brothers off and starts a run against the banks in the process. Debts are called in, banks don't have capital and won't lend to each other, credit crisis erupts and the tax payers all over the world have to step in with trillions of dollars to prop up the banks before total market meltdown and the end of capitalism as we know it.

I am sure you will try and tell me that Labour are culpable for that as well though, even though the last British government (TORY!) to be end the sticky end of short selling did fuck all about it either. Infact has your new Tory government proposed new measure to curb this damaging practice? Massive bank reform? Nope.

 

[cHodAX]

Annoying, keep calling him Samos, dunno the fuck why!

 

[ECA]

Yes, repealed in America, leaving banks around the world at risk.


All Brown/Blair are guilty of is not seeing the fall coming, neither did 100 other governments who didn't change their banking laws either. Infact the Tories had 18 years to change those banking laws as well. Did they?

George Soros fucked us with short selling on Sterling in 1992, did we change those regulations to stop it happening again?

Actually a lot of countries did see it coming, Australia, Canada, etc.

As someone else stated - Brown declared boom and bust over and stretched our credit cards to the limits in the good times - assuming we'd never see a recession again.. so when we need to borrow and cut spending in a recession it's a multitude worse because we couldn't cope with keeping spending under control in the good times.

The cuts being made now would be 1/2 as severe if Brown had balanced the budget when he was chancellor and not spent all our cash.


Of course let's not let this get in the way of OOOH THE MINERS SEETHE SEETHE.

 

[cHodAX]

Actually a lot of countries did see it coming, Australia, Canada, etc.

As someone else stated - Brown declared boom and bust over and stretched our credit cards to the limits in the good times - assuming we'd never see a recession again.. so when we need to borrow and cut spending in a recession it's a multitude worse because we couldn't cope with keeping spending under control in the good times.

The cuts being made now would be 1/2 as severe if Brown had balanced the budget when he was chancellor and not spent all our cash.


Of course let's not let this get in the way of OOOH THE MINERS SEETHE SEETHE.

Canada and Aus weren't anywhere near as exposed to the sub-primes, sadly our banks were in it up to their necks to the point where it actually exceeded their working capital. We were far from the worst affected though.

The debt economy was rampant worldwide, again not a U.K. phenomenon and infact Australia has a massive personal debt issue of it's own compounded by a growing public nation debt as well.

Oh and please keep this at an adult level, at no point in this thread have I mentioned the miners.

 

[ECA]

Aus and Canada had banking regulation that kept their banks our of the sub prime markets - that's why they were not affected to the degree our banks were.

I'm surprised that an economic scholar would ignore the protections of Glass-Steagal and continue deregulation as Brown did and not expect the shit to hit the fan.

I guess he was expecting to take ove fromn Blair a bit earlier and let the shit hit the fan after he'd left.

 

[cHodAX]

Aus and Canada had banking regulation that kept their banks our of the sub prime markets - that's why they were not affected to the degree our banks were.

I'm surprised that an economic scholar would ignore the protections of Glass-Steagal and continue deregulation as Brown did and not expect the shit to hit the fan.

I guess he was expecting to take ove fromn Blair a bit earlier and let the shit hit the fan after he'd left.

The thing is no one of any real importance was really complaining about bank de-regulation when it was helping the financial sector grow. I certainly don't remember Ken Clarke pitching in, infact he was very pro-free market and hands off approach as I recall.

Mistakes were made, yes definately. They only compounded the problem though, they didn't create it. Infact I would put much of the blame at the door of George Bush Jr as the markets really got free reign from the day he took office, sub-prime really wasn't a big deal back in the 1990's but by god it took off bigtime under his administration.

 

[ECA]

Actually it was Reagan/Carter who made the first blow on Glass-Steagal, and Bill Clinton who finished the demolition - certainly Bush didn't help in anyway shape or form, and actively contributed to the BP oil spill by infesting the MMS with his cronies and turning it into a rubber stamp, but that's mroe of an issue.

The problem is that the banks just make new shit up that hasnt been regulated yet so they can play the same old games.

That's why the seperation between investment banks and consumer banks is so important. ( If the current government does one thing I wish it was this ).

 

[Embattle]

Australia ?
Canada ?

Generalise much ?

They bucked the trend due to mineral wealth.

 

[cHodAX]

That's why the seperation between investment banks and consumer banks is so important. ( If the current government does one thing I wish it was this ).

Amen.

 

[cHodAX]

I was talking about who came off badly not who already has large debts. As mentioned government debt is one aspect but also personal debt and the housing bubble. The UK did badly on all three not all the other nations did. Also, as far as those that did, 'The other boys did it too', didn't carry much weight for me in infants when I was pushing the ginger kid about and it shouldn't carry much weight in politics either.

What? All those countries had banks they were exposed to the sub-prime fiasco, some more than others and those like Iceland or Ireland almost collapsed because of it. Italy was hard hit, Spain too and combined with the housing bubble burst it really left them in the shit. Greece almost folded, Portugal is on the brink.

Austria, Demark, Sweden, Germany all bailed out banks too and countributed to the European Unions bailout fund.

Canada had to bail out to the extent of $75 billion for it's chartered banks, they just did it by stealth and said it won't cost them anything in the long run, still they had to pump the money in or make guarantees to keep the banks afloat.

Everyone made the mistake to one degree or another, you were right to point out that our housing bubble contributed heavily as well but again that housing bubble was being repeated globally. It was all down to the free for all lending era that the banks and markets encouraged.

As for your last point, it is so trite that it is hardly worth answering. Politicians the world over make mistakes, your precious Conservative party included.

 

[Wij]

Pardon? 1992, Black Wednesday, short selling causes a run on the pound, Norman Lamont props up the pound with £27 billion of public money. George Soros walks away with a billion and change after causing the markets to doubt the strength of our currency. Did we change the laws on short selling under that Tory government? No.

16 years later short selling is still legal, it kills Lehmann Brothers off and starts a run against the banks in the process. Debts are called in, banks don't have capital and won't lend to each other, credit crisis erupts and the tax payers all over the world have to step in with trillions of dollars to prop up the banks before total market meltdown and the end of capitalism as we know it.

I am sure you will try and tell me that Labour are culpable for that as well though, even though the last British government (TORY!) to be end the sticky end of short selling did fuck all about it either. Infact has your new Tory government proposed new measure to curb this damaging practice? Massive bank reform? Nope.

Short selling was not the cause of the banking crisis. Poorly-understood instruments and faith in financial models were much more directly to blame. The markets were right to be getting out of banks. Many of the banks were fucked. The HBOS collapse was blamed on short-selling at the time but we later found out that we had completely run out of money. Short-selling makes sod all difference once the market gets wind of that.

The fact that we now have a slowdown is due to much of the recent growth being led by consumer demand backed by credit. Now that people realise the economy and their prospects are not a magic fairy ride many people would rather pay off their debts than buy shiny things. Credit bubble, housing bubble, it was all temporary. Also the biggest problem with the defecit is not the bailout costs. It's the structural defecit that is worrying and by definition the bank bailout isn't included in this figure.