Print Story Think of it as a preventative autopsy
Diary
By TheophileEscargot (Fri Apr 24, 2009 at 08:09:36 AM EST) Watching, Theatre, MLP (all tags)
Theatre: "Death and the King's Horseman". Watching: "Superman II". Budget. Web.


What I'm Watching
On DVD, watched both the Richard Donner and Richard Lester cuts of Superman II. Donner directed the first movie, went wildly over-budget on the second, was sacked and replaced by Lester. Lester also cut out the Marlon Brando scenes, which would have been expensive.

The versions aren't as different as the fans sometimes imply. Donner omits the big terrorist fight, and adds more drippy romance. However, it's fun to see Brando hamming it up, and the Donner version makes more sense regarding Superman getting his powers back. So I can't really favour one version over the other.

Nice movie on the whole though. I like the way Kent/Superman goes completely to pieces after the diner fight, never having felt pain before. Kneel before Zod!

Theatre
Saw Death and the King's Horseman at the National Theatre. 1975 Nigerian play by a Nobel-winning playwright. In colonial Nigeria, tradition dicates a chief with the rank of King's Horseman must commit suicide to accompany the dead king into the underworld. But the British authorities have other ideas.

Very elaborate production. Large cast with about 20 people on stage, lots of dancing, drumming and singing, smoke and fire and shadow effects, ethnic statues: even the lampshades are played by sinuous dancers. Works very well, good fun and entertaining to watch.

To a degree though I think they're trying to dress up a rather lugubrious script. At times the talky bits do drag a little, and the extended metaphors are a bit hard to follow: maybe the translation, or just my ignorance of Yoruba culture. Also I thought the ending was predictable, but my companion didn't work it out.

One of the interesting aspects was the way the all black cast played the English roles in whiteface. The main characters play it fairly straight, the minor ones with gleeful exaggeration. Some of those performances alone are worth the ticket.

Notable: good seats for just £10 thanks to the Travelex sponsorship (It's a nice modern auditorium with good views everwhere: no getting stuck behind a Victorian pillar way up in the gods). It's an extraordinarily good deal: cheaper than a central London movie ticket, and not a little 3-hander cast either. If you're in London on a budget, it's well worth keeping an eye on the National Theatre website for these.

Overall, well worth seeing, though a little too slow to be classic. Review, review.

Budget
Guardian, Stephanomics, Anatole Kaletsky, Lenin's Tomb, Stumbling & Mumbling, Robert Peston on the UK budget.

Politically, the Tories seem to have finally hit their stride: either Osborne's sorted his act out, or having Kenneth Clarke on board has helped. But the media, the internet and office conversation all seem to echoing their talking points now: sea of red ink, futile attempt to soak the rich and raid their pensions.

It seems to me that the big political problem with the 50% tax band for earnings over £150,000, is that the two groups who earn that much and can't easily dodge it are: newspaper editors and newspaper columnists. They're salaries, so they can't easily funnel it into stock options. And they can't really leave the country as no other nation really wants to pay them £150,000 to spout angry ill-informed gibberish.

Going beyond the talking points, if I remember Peston's "Who Runs Britain" book correctly, the rich currently have very generous pension provisions, given after the last round of we'll-all-leave-the-country threats. So they don't particularly worry me.

Now going beyond the talking points into the more interesting stuff, the Stephanomics link points out:

The Treasury now thinks that the structural deficit will be 9.8% of GDP this year - out of an overall deficit of 12.4% of GDP. Almost all of that has appeared in the last two years: the Treasury claims the structural deficit was a mere 2.7% of GDP as recently as 2007-8
What this means is: they think that the basically the whole post-Big-Bang City boom is just gone. It was all a shell game: that tax revenue ain't coming back. If true, then for the City this isn't a recession, it's just the shape of things to come.

Regarding the borrowing, it's not that surprising. Beforehand Peston was saying it was an important issue, and that the value would be somewhere between £160bn and £200bn. Actual number was £175bn, basically the middle of the expected range.

As the Stephanomics and Guardian links worked out, the other interesting thing is that the budget contains significant spending cuts in real terms in the long term. Politically Labour seem to have won that battle: it was buried deep enough in the detail it wasn't part of the initial media reporting, and now the news cycle has moved on, it'll not reach the general public. So if the Conservatives win the next election, they're now committed to Swingeing Tory Cuts even if they borrow and spend to Labour plans. New Labour may be writhing belly-up on the ground, but it can still administer a fearsome bite.

Overall then, given the current situation it doesn't seem like that bad a budget. Would have been better not to start from here: with no Olympics, no vast IT spending on NHS and ID cards; it seems Gordon Brown bought into the Good Policy explanation for the Great Moderation and thought the boom was permanent.

Could have been more radical: ending Trident, cancelling Olympics, levy inheritance taxes at similar rates to income taxes: but those would be radical measures and they're not really bold enough. Given that those are outside Alastair Darling's powers, as an individual he doesn't seem to have done too bad a job of it.

Web
Articles. Erwin James confesses. Sociology of torture memos. Long but well worth reading, Stockdale on Epictetus: Courage Under Fire.

News. Jared Diamond sued. Ice and Fire TV pilot. Movies: Ridley Scott to film Forever War in 3D. Eagle of the Ninth to be filmed.

Random. Theatre robots. Cursor kite. Susan Boyled Potatoes recipe. Star Trek Limited Edition Titanium Spork. Alcoholic Mist.

Video. "I have had it with these monkey fighting snakes". Space station views Superpowers student short. Robot penguins.

Economics. China's dollar trap like old French Sterling trap. Ebay diminishes antiquities looting. Harsh "End of Poverty" review (MR)

If you were to take the most overdone and most caricatured cocktail-party scenes from Atlas Shrugged, if you were to put the content of Rand's "whiners" on the screen, mixed in with at least halfway competent production values, you would get something resembling The End of Poverty.

Pics. Non-digital. Cassini.

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Think of it as a preventative autopsy | 39 comments (39 topical, 0 hidden) | Trackback
Hmm, some problems rendering pound signs by TheophileEscargot (2.00 / 0) #1 Fri Apr 24, 2009 at 08:18:00 AM EST
But since it's really hard posting complicated Scoop diaries from a phone, you'll just have to suck it up.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
Looks fine from here. by Scrymarch (4.00 / 1) #9 Sat Apr 25, 2009 at 05:18:22 AM EST


The Political Science Department of the University of Woolloomooloo

[ Parent ]
Fixed it when I got to a computer by TheophileEscargot (4.00 / 1) #10 Sun Apr 26, 2009 at 03:48:52 AM EST
For some reason HuSi acts weirdly through a proxy: can't submit or edit stories, so have to do it via phone.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
Superman 2 by nebbish (4.00 / 1) #2 Fri Apr 24, 2009 at 08:18:35 AM EST
What struck me when I saw it a few weeks ago for the first time since I was a kid was the huge amount of money spent on what is a pretty bare bones, simple film (not that that's a bad thing). I loved the Niagra Falls sequence, and the North pole set is astonishing - must have been lots of fun to design.

There's a lot about government spending cuts in today's Guardian. It's a bit worrying for me, as I suspected when the shit first hit the fan last year my job - and career - will probably be at more risk than most in the long term.

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It's political correctness gone mad!

You'd hope by TheophileEscargot (2.00 / 0) #3 Fri Apr 24, 2009 at 08:24:06 AM EST
That they'd cut Olympic, Trident, NHS IT, ID card and Afghan War spending before cutting housing for the poor, especially at a time when homes are being repossessed. But they probably won't.

My company usually cuts jobs in July/August... I'm expecting a big swathe this year. If I happen to survive that, will probably last another year.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Best of luck by nebbish (4.00 / 1) #4 Fri Apr 24, 2009 at 08:34:06 AM EST
Are your skills transferable? A computer programmer friend was recently made redundant and he's having problems finding another job because his skill set is pretty narrow (and also a bit archaic I think, given what he's said about the company in the past).

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It's political correctness gone mad!

[ Parent ]
I should be OK by TheophileEscargot (2.00 / 0) #5 Fri Apr 24, 2009 at 08:37:36 AM EST
I've got reasonable savings, and I'm not too out of date. Would probably take a while though. Programming jobs tend to be in short supply in a recession, as it's very easy to cut the development of new systems.

Hopefully I'll last through the next round though.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
If that's your definition of by Breaker (4.00 / 1) #6 Fri Apr 24, 2009 at 11:24:02 AM EST
"not a bad job"

Then I'd hate to see your definition of "fail".

Almost 300 billion to be borrowed in the next 2 years, on top of the rest of the borrowing.  Bank nationalisation losses not accounted accurately.

Nope, this was a cowards budget - announcing cuts for after the election so the government suffers no political illwill.  Leave the state's finance in such a parlous state that the next government will have to be brutal with the knife, and even more brutal as interest payments on our national debt will be higher than if the pain in public sector spending was taken now.  Politically astute, but morally bankrupt IMHO.


Cuts after the election by TheophileEscargot (2.00 / 0) #7 Fri Apr 24, 2009 at 11:38:59 AM EST
Cutting spending before the election would mean cutting them in the recession. That would be pro-cyclical: it would make the recession worse. So it's not really an option.

Especially with the latest stats. With the last quarter the biggest GDP decline since 1979 you don't really want to be saying "hey, let's shrink the economy even faster".
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Depends who you read. by Breaker (4.00 / 2) #8 Fri Apr 24, 2009 at 01:43:44 PM EST
As to whether it'll be worse, overall.

Do you want a short, sharp recession with a quick recovery, or a long grinding recession where you've spanked so much cash up the wall trying to delay it that you've nothing left to help after a few years, and have to crush the profitable sector to feed the unproductive?

"let's shrink the economy even faster"
How is the public sector "the economy"?  The recession will be over when business drives growth, not borrowing to prop up the client state.


[ Parent ]
PREACH ON, BROTHA! by lolwhat (2.00 / 0) #11 Sun Apr 26, 2009 at 10:40:22 AM EST
Preach the truth the fuck on.
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If cigarette packs are required to have pictures of diseased lungs, college brochures should be required to have photos of grads working at Starbucks.
[ Parent ]
Also: by lolwhat (2.00 / 0) #12 Sun Apr 26, 2009 at 10:44:00 AM EST
Some tinfoilers among us would say that the economic destruction we're currently experiencing is being deliberately worsened, so that the powers that be "have no choice" but to go to a single global currency, a single world government, ...
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If cigarette packs are required to have pictures of diseased lungs, college brochures should be required to have photos of grads working at Starbucks.
[ Parent ]
That doesn't seem to make sense though by TheophileEscargot (2.00 / 0) #13 Sun Apr 26, 2009 at 04:48:59 PM EST
Do you want a short, sharp recession with a quick recovery, or a long grinding recession...
Suppose that with the planned borrowing and spending, GDP drops 3.5% and there are 3 million unemployed over the next year.

Now suppose that they do what you want: tdon't borrow, cut government spending, and instead GDP drops 5% and there are 4 million unemployed, (say a million 5-a-day consultants sacked overnight). How is that going make it a "short, sharp recession with a quick recovery"?

Now capitalism will, eventually, create jobs from an excess of unemployment through "creative destruction". It will eventually create growth to substitute for the shrinking GDP. But not instantaneously: it's a slow process. The more jobs are lost, the longer it will take to create replacements for them.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Look at the taxation by Breaker (4.00 / 1) #14 Sun Apr 26, 2009 at 07:16:35 PM EST
That is planned.  Not the headline 50% which will frankly raise diddly-squat, but the NI.  Those are bastardly taxes because they affect everyone that is employed, both high earners and minimum wage.

They need this extra tax income to cover interest on debt, and to present a figleaf to investors (or the IMF should it come to that).

Maintaining an army of 5 a day consultants and other makework jobs means that the NI has to be higher, and borrowing has to be higher to pay their wages.

The increase in NI makes it more expensive for actual businesses to retain staff, and even more so to employ new staff.  So the state grows, and business bears a higher burden.

Nice way of trampling any green shoots into the dust.


[ Parent ]
You just ignored the point by TheophileEscargot (2.00 / 0) #15 Mon Apr 27, 2009 at 02:06:04 AM EST
Your way means a bigger drop in GDP, a bigger rise in unemployment, which will take more time to correct, and hence a longer, worse recession.

Other points you've ignored in the past:

1. Why did the quantitative easing announcement not cause the gilt price crash you've predicted?

2. Are you using spread betting etc to hedge against your predictions, or do you not really believe in them?
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Bit busy right now for in depth analysis by Breaker (4.00 / 1) #16 Mon Apr 27, 2009 at 12:54:16 PM EST
  1. It hasn't worked its way through as yet; the reckoning is coming.  Plus, the government is buying them up via the nationalised banks to artificially inflate the price. 
  2. Are you?  For me, I have been either working 16 hour days at work, or on the house.  No time to speculate, if I'm putting some cash down into the markets it'll need monitoring and up until Wednesday I had no idea when I'd be in a birthing room.


[ Parent ]
Well by TheophileEscargot (2.00 / 0) #17 Tue Apr 28, 2009 at 06:23:00 AM EST
You're still not addressing the point: cutting government spending in the middle of the recession means a bigger drop in GDP, and more people unemployed.

More jobs lost means it will take longer to create them. Bigger GDP loss means it will take longer to make it up. How does that mean a "quick recovery"?

It's a trade-off. If you're developing software and you cut the schedule in half, keep the staff numbers the same, the trade off is that you're going to lose quality.

If you want to reduce the deficit by cutting spending in a recession, the trade off is that you're going to make the recession worse.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
You forget by Breaker (2.00 / 0) #18 Tue Apr 28, 2009 at 11:33:35 PM EST
Keynesian economics only works if you put surplus by in a rainy day.  We haven't done that, we've maxxed out our cheaper loans mechanism and now only have the expensive credit card option.  We are in a hole and you advocate to keep digging.

Taxing businesses harder during a recession means they're lairy of taking on people.  Cutting government spending means you can cut business a break, making it easier to hire people and easier to retain existing staff.  And drop tax on those earning to ensure they are more solvent, and more likely to spend on stuff.


[ Parent ]
Um, no and yes by TheophileEscargot (2.00 / 0) #19 Wed Apr 29, 2009 at 10:29:31 AM EST
Keynesian economics only works if you put surplus by in a rainy day
Nope. It's better to do it that way since that way you save the interest costs of borrowing. But other than that the effect is the same. You take money out of the boom time when the economy is overheating, and put it in the bust time when there isn't enough private spending to keep businesses functioning and people in work.

Taxing businesses harder during a recession means they're lairy of taking on people.
Yep. That's what the borrowing is about: saving the tax rises until the recession is over.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
But then by Breaker (2.00 / 0) #20 Thu Apr 30, 2009 at 05:01:39 AM EST
You assume rational markets to borrow from.  We are so overborrowed that the markets will no longer treat us rationally if we continue to borrow, without showing any effort to cut wasteful spending.

The caterpillar balancer and GTLSB hid NI increases in the budget, BTW.


[ Parent ]
That's really a different issue by TheophileEscargot (2.00 / 0) #21 Sat May 02, 2009 at 10:27:42 AM EST
The point is, that cutting the deficit in the recession will worsen the recession. Yet some people have got the idea that doing so will make the recession better.

What you've presented in your last comment is an argument that even if it makes the recession worse, it's worth doing.

You might say, for instance, that the greater deficit will lead to higher borrowing costs of, say, 300 million pounds, and so it might be worth putting, say, 300,000 more people out of work to save on it.

However, I've yet to see any kind of serious cost benefit analysis suggesting that.

Moreover, the argument that greater debt will lead to higher borrowing costs seems rather dubious. The predicted collapse in gilts hasn't happened. You assure me that it will happen, but you can't explain the delay. Stumbling and Mumbling reckons the borrowing is affordable. This VoxEU article reckons the flight away from certain nations' bonds is due to irrational panic and euphoria.

So given that the borrowing markets are irrational, it's hard to see how you can claim to predict their behaviour based on particular borrowing levels. You might chuck hundreds of thousands of people out of work in an attempt to placate the bond traders, but just find them panicking anyway.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
No by Breaker (4.00 / 1) #22 Tue May 05, 2009 at 10:20:31 AM EST
I am not arguing that it will make the recession worse, I am arguing it will make the recession shorter and yes, more brutal.  A bit like pulling a plaster off skin - if you do it slowly it hurts for the minute it takes you to peel the whole thing off.  If you rip it off in one go it smarts more but for a shorter time.

Continually borrowing and borrowing means the interest rate we pay increases.  Increasingly more and more of our annual GDP must be paid to service debt, doubtless in your view that's not anything to worry about.

Gilts are being massaged by the government, which is pretty clever().  Except we issued £4.3 billion of new gilts recently, only to have a buy back of £6.5 billion of previously issued gilts

Stumbling and Muntering also concurs with me that the merry-go-round can't go on forever (text from your link)- "there’ll come a time when Asian savers discover better things to do with  their money than lend to highly-indebted governments."

Cutting public expenditure by cutting waste is not going to see "hundreds and thousands" of people out of work.  Not cutting expenditure and trying to bring some sanity in public borrowing will mean the next 20 years isn't wasted in paying off high interest loans incurred now because the socialists can't stop spending other people's money.

() For now at least, until the Treasury or markets pull the plug.


[ Parent ]
Not quite sure what that's supposed to mean by TheophileEscargot (2.00 / 0) #23 Tue May 05, 2009 at 03:04:34 PM EST
I am not arguing that it will make the recession worse, I am arguing it will make the recession shorter and yes, more brutal
I don't really see what "more brutal" means if it doesn't mean "worse".

I've said what I mean by worse: a greater fall in GDP, and a greater rise in unemployment. I'll assume for the moment that by "more brutal" you agree that both of those will happen if the government cuts spending during the recession as you want.

So, how does that make the recession shorter?

For a recovery to be quicker, for a greater drop in GDP and a greater rise in unemployment, there must be some mechanism by which more jobs are created per week, and more growth is generated per week. But you haven't given any such mechanism.

When pressed, you just try to dodge the issue by going on about the future costs of debt. But that's wholly irrelevant to the issue of how the recession is magically shortened.

I think the problem is you're repeating arguments used in mass media by people rich enough not to have to worry about unemployment, who are happy to have a longer and deeper recession if it means paying less taxes at the end. But they can duck the issue of the consequences, because in a newspaper column or a TV soundbite they don't have to answer troublesome follow-up questions.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Nope by Breaker (4.00 / 1) #24 Wed May 06, 2009 at 10:51:55 AM EST
By worse I mean very quickly all the jobs that would have been lost are lost inside 3 months, not 2 years.  I do not imply that there will be more jobs lost overall, just at a faster rate initially.

That will give businesses some instant stability if their immediate overheads are not as great.  Yes, the horses will be frightened but what turns the tide in recessions is public confidence.  Get the worst out of the way and that confidence will return more quickly as the businesses start hiring again, and more importantly, more small businesses will be founded.

Which is why it is also essential to remove the sticky red tape, regulation and excessive auditing introduced by Labour in the last 12 years.  Give small businesses tax breaks, stop penalising the working poor by withdrawing tax credits and benefits so early.  Allow small businesses better leeway for casual hire and fire; all of these things and more to encourage startups and innovation, to foster those welcome green shoots of recovery.

Your way leads to a grinding slow bleed of jobs and confidence, whilst the debt-o-meter continues to rise and rise.

Do these discussions always have to end with you attacking me personally?  Sometimes it's as a right wing shill, other times a Tory apologist, and now you accuse me of blindly regurgitating mainstream media opinion.


[ Parent ]
This doesn't make sense by TheophileEscargot (2.00 / 0) #26 Thu May 07, 2009 at 10:59:15 AM EST
By worse I mean very quickly all the jobs that would have been lost are lost inside 3 months, not 2 years. I do not imply that there will be more jobs lost overall, just at a faster rate initially.
First, let's look at jobs. Let's suppose, just for example, that there are 200,000 Five-a-Day Consultants whose jobs are cut in the recession so their salaries can be used to pay down the debt.

Fine, but that means the overall level of jobs lost will be higher. It's not just faster. Salaries are too big a part of government spending to cut without job losses.

Now start considering GDP as well. The government is paying rent for their offices, for their stationary, for their computers. There are cleaners and caterers and private contractors, all of whom have that business taken away. The Five-a-Day consultants were also spending their salaries on consumer goods, haircuts, luxury goods, services. That money's now gone out of the system too. So the private sector loses more jobs as well.

It's basic Keynes: aggregate demand has decreased as that government spending has been sucked out of the economy into debt repayments. Overall unemployment and GDP are increased. And since the loss is greater, it'll take longer to recover from.

Yes you get the benefits in the future of lower debt repayments. But the cost is a deeper and longer recession.

I'm just trying to understand why you're saying these things. It's as if the conversation is going in circles like this. Imagine that current spending is a green bucket, and paying down the debt is a yellow bucket.

You: The yellow bucket is important, so we need to scoop some from the green bucket into it.
Me: Well maybe, but the cost of that is that the green bucket is less full.
You: No, after we've scooped out money to the yellow bucket, the green bucket is still just as full.
Me: No it isn't, you've just scooped money out of it.
You: Look, it's really really important that the yellow bucket be filled.
Me: So you're saying you accept the cost of a less-full green bucket?
You: No, it's still just as full.
Me: But you've taken money out of it.
You: Well it be emptier for 3 months, but then it will magically re-fill itself.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
...Cont'd by Breaker (2.00 / 0) #27 Fri May 08, 2009 at 06:43:21 PM EST
...there are 200,000 Five-a-Day Consultants whose jobs are cut in the recession so their salaries can be used to pay down the debt.
Now we're getting to it.  Now we need to wonder - will those 200,000 people go on to find jobs in the productive sector, and be net contributors to the taxation regimen, or will they be unemployed, or will they find another State teat to suckle upon?

The government is paying rent for their offices
At poor rates, I'll lay a pound to a penny.  Or, as has happened, they've lashed out hugely and either refurbed historic properties or built extravagant new locations.
for their stationary,
At poor rates
for their computers.
LOL that's worked out such good value so far.

There are cleaners and caterers and private contractors, all of whom have that business taken away.
So, what you're saying is that we've just saved even more than just the headline 200K MakeWorks?

Excellent.

The Five-a-Day consultants were also spending their salaries on consumer goods, haircuts, luxury goods, services.
 That money's now gone out of the system too. So the private sector loses more jobs as well.

Without those five a day consultants stealing the money from the productive via the State and losing some in the PAYE process due to bureaucracy (and indeed this week, I believe fraud is the word being bruited about in Cabinet circles), the productive have more in their pocket to spend on "consumer goods, haircuts, luxury goods, services".  And they have more, because they haven't burnt a certain amount in governmental tax and waste overhead.

Would I be right in thinking that you seem to think that increasing the role of government now is to increase employment through borrowing?

I can't see any sense in your bucket analogy.  I would summarise our opinions as:

You: increase national debt, regardless of impact on our FX rate and cost of borrowing, to employ people in makework jobs to keep things ticking along, because Keynes said so and he's a right proper 'conomist and everything!
Me: cut costs where you can, minimise government spending as capital outlay.  Bin the useless and the intrusive, and give the small business owner loads of taxfree earnings.

Am I being unfair / unrepresentative of your position there?  If so, please correct me.


[ Parent ]
(Comment Deleted) by TheophileEscargot (2.00 / 0) #28 Sun May 10, 2009 at 10:33:29 AM EST

This comment has been deleted by TheophileEscargot



[ Parent ]
You're not making sense by TheophileEscargot (2.00 / 0) #29 Sun May 10, 2009 at 10:49:16 AM EST
Without those five a day consultants stealing the money from the productive via the State and losing some in the PAYE process due to bureaucracy (and indeed this week, I believe fraud is the word being bruited about in Cabinet circles), the productive have more in their pocket to spend on "consumer goods, haircuts, luxury goods, services".
The reason spending helps against the recession is that it boosts aggregate demand: the total spending on goods and services.

First, you seem to have a strange theory that aggregate demand is only boosted by "productive" people: i.e. those you approve of. But Keynes' classic example was spending money on getting people to dig holes and fill them in again: an example chose precisely to illustrate that even useless spending helps.

Second, you seem to have another strange theory that money used to pay down debt goes into the pockets of the "productive". How does it get there? That money's going to the holders of UK debt. Chief example: the Chinese government. How do you think this debt repayment money boosts aggregate demand in the UK?

Even insofar as it's held in Britain, that's investment money: i.e. on the supply side of the equation, not the demand side. The people who get that money may well want to invest it in other places, say by building factories. But nobody wants to build factories in a recession: because there's no demand for a load of new goods.

You're reducing demand at the time when you need to be increasing it: by taking money away from people who are spending it and are in the UK; and giving it to institutions who want to invest it and are all over the world.
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It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Or I am explaining myself poorly by Breaker (2.00 / 0) #30 Mon May 11, 2009 at 02:49:50 PM EST
Or you are deliberately misunderstanding; who knows.

First, you seem to have a strange theory that aggregate demand is only boosted by "productive" people

i.e. those you approve of.
CLASSWAR! 

But Keynes' classic example was spending money on getting people to dig holes and fill them in again: an example chose precisely to illustrate that even useless spending helps.
You can't do Keynes half arsed.  You have got to save during the profitable, surplus years of a nation in order to use that capital as a tool to bargain cheaper interest rates when you have to borrow to pay people to fill ditches.  We have not done that; we've ramped up our borrowing in the boom years so have no credibility in the face of creditors - hence we pay a risk premium to people we want to borrow off.
And it's not just "useless" spending, is it?  It's people employed by the State to monitor and intrude, to nanny and hector.  If the "makework" money was being directed to nurses (five a day consultants no one likes, how about "ward cleanliness martinet" instead?) and teachers (no child leaves school unable to reede or rite nur doo sumz), then perhaps the makework spending could be justified.  But that's a big word, could.

Second, you seem to have another strange theory that money used to pay down debt goes into the pockets of the "productive".
No, that is not what I have said.  Stop borrowing money like a drunken marine on the eve of a suicide mission, and live within our means.  Stuff we have cash to pay for today costs what the supplier charges for it.  Stuff we have to borrow to buy costs what the supplier charges for it, plus the interest, plus the future burden, plus the opportunity cost of not actually having cash to buy stuff with, or bargain future credit terms with.

How does it get there?
By paying cost price only for goods we wish to buy.  So the overall tax take has to be lower as we're not paying the money lenders their premium.

That money's going to the holders of UK debt.
Yes.  Seen the UK crossrate to major currencies recently?

You're reducing demand at the time when you need to be increasing it
Not entirely sure about that one; if the productive have money in their pocket they'll spend it.  And that will drive recovery, not 1000 more five a day counsellors, or 10,000 more.  Nurture the productive sector for recovery.


[ Parent ]
I see you're trying to dodge the issue again by TheophileEscargot (2.00 / 0) #31 Mon May 11, 2009 at 03:13:48 PM EST
You can't do Keynes half arsed. You have got to save during the profitable, surplus years of a nation in order to use that capital as a tool to bargain cheaper interest rates when you have to borrow to pay people to fill ditches. We have not done that; we've ramped up our borrowing in the boom years so have no credibility in the face of creditors - hence we pay a risk premium to people we want to borrow off.
There are two problems with this. First, it's wrong: there's no "you have to save" rule, and you've never even attempted to provide any evidence for it.

Second, it's totally irrelevant to your argument. Now, there are sane people who argue against Keynesian deficit spending by saying even though it will shorten the recession, that shortening isn't worth the cost. But that's not your argument: your argument is the crazy argument that Keynesian spending will lengthen the recession, and the opposite is what is required.

You're also trying to dodge the other issue: how you imagine that excess debt repayment is going to "the pockets of the productive" in such a way as to increase demand. You've asserted that this happens, but never explained how. Is there perhaps an invisible fairy with a magic wand, sprinking the money around?

As I said: debt repayments go to the supply side, not the demand side. The people investing in UK gilts are investors, not consumers. They don't want spend money: having it disappear in exchange for goods and services. They want to invest their money, ending up with more of it than they started off with. So, that money does not boost demand.

If you have an argument otherwise, tell me what it is. Stop trying to evade the issue.
--
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Are you deliberately misunderstanding me? by Breaker (2.00 / 0) #32 Mon May 11, 2009 at 03:49:17 PM EST
First, it's wrong: there's no "you have to save" rule, and you've never even attempted to provide any evidence for it.
Keynes gave a very specific set of circumstances for his rules, and didn't provide for anything outside those.  So to try and enforce Keynesian rules onto a non-Keynesian scenario is invalid.

Now, there are sane people who argue against Keynesian deficit spending by saying even though it will shorten the recession, that shortening isn't worth the cost.
We've gone beyond that though haven't we?  We are no longer in Keynesian territory, but still trying to apply that theory to a situation which does not conform to Keynesian cycles.  We can no longer borrow on Keynesian terms.

I do not think we are in a textbook Keynesian cycle here.

What have you got against honouring our debts?  Whilst you agree that certain "sane people who argue against Keynesian deficit spending", let me reiterate - we are beyond that.

We must repay the debt, for the future ability to borrow more once we are seen to be a country worthy of lending money to.  That is, offer a secure rate of interest with an ultra-low risk of default.  We are not that country right now; we are increasingly competing with other, more stable countries in "proper" Keynesian cycles and we are paying that premium.


[ Parent ]
Yet again, you're trying to dodge the issue by TheophileEscargot (2.00 / 0) #33 Mon May 11, 2009 at 04:08:19 PM EST
You said, in this comment:
Do you want a short, sharp recession with a quick recovery, or a long grinding recession where you've spanked so much cash up the wall...
Your argument was that cutting spending and paying down the deficit would shorten the recession. That's what I'm arguing against. Are you retracting that argument?

Because now you're arguing quite differently about future borrowing ability, which you know will go down because you have kind of a gut feeling about future bond prices. But even if true, that has no relevance to your argument that cutting spending and paying down the deficit will shorten the recession right now.

"What have you got against honouring our debts?" is another shabby attempt at distracting from your inability to back up your arguments. I'm not advocating defaulting on debts.

"We are no longer in Keynesian territory" is another random assertion without evidence to support it.

I say again: if you're maintaining the argument that cutting spending and paying down the debt will shorten the recession: TELL ME HOW.

You're taking money away from demand: government employees and contractors who are living in the UK and buying goods and services. You're giving that money to investors: people who don't want to give away their money in exchange for goods and services, and want to get more money back.

We're in a recession. We have plenty of space capacity to supply goods and services: empty shops, idle factories and unemployed workers. But they're idle because people are nervous and aren't demanding these goods and services.

The way to shorten the recession is to move money from supply to demand. You want to move the money from demand to supply.
--
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Cutting spending by Breaker (2.00 / 0) #34 Tue May 12, 2009 at 03:15:25 PM EST
And stopping printing money, yes I am advocating that.

Cut 20% out of most state departments funding where possible (with those provisos I went on about previously; namely no frontline services to be targeted but management salary reductions and so forth, burn the quangos).  Bin Trident and ID cards.  Look down the back of the state sofa for a few pennies.  Stop hiring more makework jobs (I notice you've ducked my question of the social implications of hiring a hectoring nanny instead of a hole digger / hole filler).

In short, let's balance our spending with our income so our debt does not increase and our coupon payments on gilts then start paying down our debt.  I am not and have never said we should instantly pay down that debt; for the most part we cannot (fixed term bonds and all that) and also because we haven't got the money.

So, am I clear on what I mean by reducing expenditure and paying down debt?

We can then use those pillars to rebuild industry, with some of the measures I have previously outlined - cutting employers NI for example.  Raising the income tax threshold, pay for it by reducing the tax credit threshold (currently 55K) - that'll put money in the pockets of the working poor and please the socialists.  Looking at removing pointless regulation on business, tax breaks for small businesses - which is where I believe the recovery will be led from.  You only need to see how the dotcom crash recovered - small firms (often sole traders).  Which GTLSB then targetted with the bastardly IR35.

Reducing expenditure will result in redundancies, yes, out of the public sector.  In one big hit; that is our pain taken in one big dollop of medicine.  Many of those we are paying six figure salaries should be competent enough to form small companies, surely, if they're worth 100K +?

So, we've cut waste, we are no longer racking up debt and we have made small business more profitable and easy to manage.  We've put money into the pocket of people who really need it and are more likely to spend than be forced into taking on loans to see them through (IIRC some basic food items are up 30% from 2 years ago?  Might be wrong on that figure though).

So yes, I agree with you that the recovery will be demand driven.  But I argue a way that will be quicker to recovery as it will not be weighted down with the folly of overborrowing.

Keynes only factored in likely rates of borrowing, not the super rates we are likely to face soon.  To mindlessly pursue Keynes's method without making sure we're starting from the correct balance sheet is not going to work.  Any recovery is going to be limited by the increased taxation we will be paying for all that debt we signed up for.


[ Parent ]
(Comment Deleted) by TheophileEscargot (2.00 / 0) #35 Wed May 13, 2009 at 09:36:15 AM EST

This comment has been deleted by TheophileEscargot



[ Parent ]
Well by TheophileEscargot (2.00 / 0) #36 Wed May 13, 2009 at 09:47:05 AM EST
Cut 20% out of most state departments funding where possible (with those provisos I went on about previously; namely no frontline services to be targeted but management salary reductions
All of this reduces demand. The firms that are providing these services for the government will be hit. So will the firms providing goods and services to the managers whose pay you've cut. Many of those firms are going to go bust or lay off workers.
We can then use those pillars to rebuild industry, with some of the measures I have previously outlined - cutting employers NI for example. Raising the income tax threshold, pay for it by reducing the tax credit threshold (currently 55K)
Ok, so you're giving some of the money back in tax cuts. That part of the demand isn't being lost: it's just being shuffled around. But there's no reason to think that will shorten the recession. Moreover, the economy takes time to adapt to change. If by redistributing the wealth you're moving, say, a million pounds of demand from Harvey Nichols to Primark; that's going to cause short-term disruption as Primark tries to open new stores and Harvey Nichols has to close them. In the short term, this too will worsen the recession.

Looking at removing pointless regulation on business, tax breaks for small businesses
Removing regulation: not really relevant to the issue of cutting spending.

Tax breaks for small businesses: again, this is on the supply side. The problem for businesses in a recession is that no-one's demanding the services they offer. It may be nice for when the boom gets underway, but it doesn't shorten the recession. And the money you're refunding them has come straight out of demand: it's coming from the salaries you've just cut.

Again, you're implying that debt worsens the recession in very vague terms: "weighted down with the folly of overborrowing." You're not descibing any actual mechanism.

Moreover, since you've said 20% of most department's funding, let's look at the actual impact of that. UK taxation is about 39% of GDP. So 20% of spending would be 7.8% of GDP. Say "most" means "half": the actual impact of your cuts is to instantly cut 3.9% off GDP. Now estimates differ, but the existing recesion is only about a decline of 4% or so.

So, you're basically doubling the severity of the recession and saying "don't worry, we'll recover more quickly because we will no longer feel an intangible sense of gloom about future debt burdens".
--
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Armchair economist. by Breaker (2.00 / 0) #37 Thu May 14, 2009 at 06:04:08 AM EST
For the most part those 20% cuts will hit those directly on the teat of the state.

moving, say, a million pounds of demand from Harvey Nichols to Primark
Good news for removal firms and shopfitters then, eh?

Removing regulation: not really relevant to the issue of cutting spending.
Tell you what; you start a small business, run from your home (which you own), employing no one but you and your partner and we'll have another chat about this one, shall we?  For a start, 600+ fucking quid on accountants because if we fill in our tax return incorrectly (mistakenly, mind, not deliberately) there is no recourse to correction, only fines and "your business premises may be at risk".

For the third time;
I notice you've ducked my question of the social implications of hiring a hectoring nanny instead of a hole digger / hole filler)
...Tap...Tap...Tap...

So, you're basically doubling the severity of the recession and saying "don't worry, we'll recover more quickly because we will no longer feel an intangible sense of gloom about future debt burdens".
No, I'm saying enough is enough.  I'm saying let's lay the soil to foster those green shoots we've been hearing about. 

On debt - work it through.  Make a spreadsheet up with ooh say a hundred pounds.  Iterate it through for 25 years at 5% of interest, compounded.  Then 7.5%, then 10%, then 15%.

Now, do you think that's a sustainable way to run a country?  You're saying that 4% of GDP in wasted expenditure is worth preserving?

At what point is the borrowing "enough" in your eyes?  At what point are interest rates "low enough"?  At what crossrate to the dollar, euro and yen have we devalued our currency enough?


[ Parent ]
Let's stay focussed here by TheophileEscargot (2.00 / 0) #38 Thu May 14, 2009 at 08:03:25 AM EST
As I said, the thing I have a problem with is the assertion that cutting spending will shorten or improve the recession.

It's perfectly valid to say we should accept a worse recession now, in order to reap the benefits of lower debt repayments later. But I think it's a dangerous and growing illusion to think that there are no trade-offs and we can get the best of both.

Removing regulation: not really relevant to the issue of cutting spending.
Tell you what; you start a small business, run from your home (which you own), employing no one but you and your partner and we'll have another chat about this one, shall we? For a start, 600+ fucking quid on accountants because if we fill in our tax return incorrectly (mistakenly, mind, not deliberately) there is no recourse to correction, only fines and "your business premises may be at risk".
Again, this is something you seem generally disgruntled about, but it's not relevant to the issue at hand. It would be perfectly possible to deregulate and run a massive Keynesian spending programme at the same time.

For the third time; I notice you've ducked my question of the social implications of hiring a hectoring nanny instead of a hole digger / hole filler) ...Tap...Tap...Tap...
Again, "social implications" aren't relevant to the issue at hand. In terms of boosting demand to shallow and shorten the recession, useless spending does as much as useful spending.
On debt - work it through. Make a spreadsheet up with ooh say a hundred pounds. Iterate it through for 25 years at 5% of interest, compounded. Then 7.5%, then 10%, then 15%.

Now, do you think that's a sustainable way to run a country? You're saying that 4% of GDP in wasted expenditure is worth preserving?

As I've said, I've no problem with the honest argument, that we should accept a worse recession now for long term gain. It's the argument that we can have our cake and eat it that bugs me.

At what point is the borrowing "enough" in your eyes? At what point are interest rates "low enough"? At what crossrate to the dollar, euro and yen have we devalued our currency enough?
I don't really see the point of setting limits for either interest rates or exchange rates. That's a bit like driving your car on the basis of having the accelerator a certain number of inches from the floor: it's better to look at how fast you're going or what the engine revs are.

Low interest rates boost growth, but could cause inflation. Low exchange rates boost exports, but could also boost inflation. So, the way to judge when these are too low is through inflation targeting, which is what the Bank of England does already.

Since the economy is still shrinking, and inflation is falling, that suggests that they're not too low at the moment.
--
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
I give up. by Breaker (2.00 / 0) #39 Thu May 14, 2009 at 08:20:04 AM EST
Call me trhurler'ed, or whatever.


[ Parent ]
Some further interesting reading by Breaker (4.00 / 1) #25 Wed May 06, 2009 at 12:51:09 PM EST
If you've time to.


[ Parent ]
Think of it as a preventative autopsy | 39 comments (39 topical, 0 hidden) | Trackback