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Osbourne

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Tim Nice-But-Dim


i do wish this hadn't been pointed out to me.
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sally cinnamon wrote:
Yes the real problem is one of demand (businesses not even applying for loans as there is no point expanding) rather than supply of loans. Like you say many businesses especially small ones have no track record or collateral which is the market failure, the bank doesn't have enough information on them to make an accurate assessment. There is a scheme called Enterprise Finance Guarantee that small businesses can apply to where the government guarantees 75% of the loan to the bank in the event of default, so its still the bank that makes the decision on whether the business is viable, but it takes away some of the risk so the ones that are at the margin where the bank thinks they look like they have a good plan but feels its a bit of a risk, will get loans. There are limits as to the overall amount of cover any bank gets from the government though, so they can't just use this to guarantee all their loans.


I think this is important, as it doesn’t get sucked into pseudo-Keynesian multiplier mythology; if you invest it has to be in something that genuinely creates growth, but that’s the incredibly hard part in Western economies. It may be a populist meme that fat cat banks aren’t lending their bailout dosh to poor hard pressed businesses, but the real problem is businesses aren’t going to the banks with robust investment opportunities, instead you’ve got some firms sitting on reserves because they cannot see the investment opportunities they really would like to go after, you’ve got some firms choosing to pay down debt rather than borrow more because of economic uncertainty and then there are the ones who keep the myth alive, the failing businesses and highly speculative “opportunities” who would have struggled to raise finance before the financial crisis.

The reality is just so much harder the fit in with the populist narrative where it’s the banks who are at fault, firstly because it’s harder for people to conceptualise a structural lack of robust opportunities than have the idea of a general unwillingness to lend (no matter how misleading it is in practice), and secondly because it makes better viewspaper copy to talk about anecdotal businesses going down the tube because the bank wouldn’t plug the losses than it does to talk about how banks plugging losses on unviable businesses won’t lead to economic growth.

It’s the absence of genuine opportunities for economic growth that is the real problem in the UK economy and in many other Western economies, it is not an unwillingness to hike debt and indulge in half-baked New Deal style money pits which don’t deliver growth, but simply hang on the myth that you can load up with debt to do productive stuff and get a positive multiplier going. Conspiracy theories about this politician or that political party or this pantomime villain are just clumsy bits of misdirection, and building this or that political pet project, or appeasing this or that client group with a subsidy won’t bring growth.
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Kelvin's Ferret wrote:
I think this is important, as it doesn’t get sucked into pseudo-Keynesian multiplier mythology...

Some of your post made sense ... but "pseudo-Keynesian multiplier mythology" tells me there's not much chance of your view overlapping with mine.
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Scooter Nik wrote:
Image

Osbourne

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Tim Nice-But-Dim


i do wish this hadn't been pointed out to me.


Except he's not very "nice" is he.

Now, "Tim, complete c**t, and thick as pig$h!t" , possibly more accurate.
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DHM wrote:
Except he's not very "nice" is he.

Now, "Tim, complete c**t, and thick as pig$h!t" , possibly more accurate.


I think Osborne has more than a look of a well-fed Stan Laurel about him
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cod'ead wrote:
I think Osborne has more than a look of a well-fed Stan Laurel about him


Image

Image

These two combine to.....
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El Barbudo wrote:
Some of your post made sense ... but "pseudo-Keynesian multiplier mythology" tells me there's not much chance of your view overlapping with mine.


It pretty simple really:
pseudo-Keynesian because much of the vogue for "Keynesian" economics in recent times is pure opportunism based on the idea of governments increasing aggregate demand by deficit spending (stimulus), but it's only pseudo-Keynesian because where this tends to diverge from Keynes is that his management of aggregate demand would mean contracting it at the top of the economic cycle whereas pseudo-Keynesians would retch at the idea (for example New Labour didn't support it in office, and to be fair most governments would find it a hard sell to cut back in good times). So it's a kind of unviable half Keynesian idea that a deficit spending government keeps kicking the can until there's no road left. Also because Keynes was a clever man and he would have mocked the unfalsifiable supporting argument for such a strategy, that if your stimulus fails then it just wasn't big enough (repeat ad infinitum).

The second part is that much pseudo-Keynesian interest hangs off the idea of the multiplier, that if the government spends it will stimulate economic activity that will be multiplied throughout the economy, only problem is, in practice multiplier type effects are a bit of a myth. You could force banks to give £100 vouchers to every unemployed person in the country to spend in their local shops within one month of receipt, it would certainly pump money into the economy, but if those businesses just use the money to pay down their debts or increase their reserves you don't get much of a multiplier and you don't really get economic growth.

So I'm not a fan of pseudo-Keynesians and I don't think much of multiplier myths that underly much of their thinking, it's all a bit silly. If people want growth then they probably need to lobby the Government to do things they may not actually like or want, things only governments can really drive, like commissioning big infrastructure projects: airports, strategic rail links, better roads etc, things that will keep facilitating economic activity year after year, but then those sorts of things are years in the making.
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Kelvin's Ferret wrote:
It pretty simple really:
pseudo-Keynesian because much of the vogue for "Keynesian" economics in recent times is pure opportunism based on the idea of governments increasing aggregate demand by deficit spending (stimulus), but it's only pseudo-Keynesian because where this tends to diverge from Keynes is that his management of aggregate demand would mean contracting it at the top of the economic cycle whereas pseudo-Keynesians would retch at the idea (for example New Labour didn't support it in office, and to be fair most governments would find it a hard sell to cut back in good times). So it's a kind of unviable half Keynesian idea [LOST ME ABOUT HERE] that a deficit spending government keeps kicking the can until there's no road left. Also because Keynes was a clever man and he would have mocked the unfalsifiable supporting argument for such a strategy, that if your stimulus fails then it just wasn't big enough (repeat ad infinitum).

The second part is that much pseudo-Keynesian interest hangs off the idea of the multiplier, that if the government spends it will stimulate economic activity that will be multiplied throughout the economy, only problem is, in practice multiplier type effects are a bit of a myth. You could force banks to give £100 vouchers to every unemployed person in the country to spend in their local shops within one month of receipt, it would certainly pump money into the economy, but if those businesses just use the money to pay down their debts or increase their reserves you don't get much of a multiplier and you don't really get economic growth.

So I'm not a fan of pseudo-Keynesians and I don't think much of multiplier myths that underly much of their thinking, it's all a bit silly. If people want growth then they probably need to lobby the Government to do things they may not actually like or want, things only governments can really drive, like commissioning big infrastructure projects: airports, strategic rail links, better roads etc, things that will keep facilitating economic activity year after year, but then those sorts of things are years in the making.

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Kelvin's Ferret wrote:
It pretty simple really:
pseudo-Keynesian because much of the vogue for "Keynesian" economics in recent times is pure opportunism based on the idea of governments increasing aggregate demand by deficit spending (stimulus), but it's only pseudo-Keynesian because where this tends to diverge from Keynes is that his management of aggregate demand would mean contracting it at the top of the economic cycle whereas pseudo-Keynesians would retch at the idea (for example New Labour didn't support it in office, and to be fair most governments would find it a hard sell to cut back in good times). So it's a kind of unviable half Keynesian idea that a deficit spending government keeps kicking the can until there's no road left. Also because Keynes was a clever man and he would have mocked the unfalsifiable supporting argument for such a strategy, that if your stimulus fails then it just wasn't big enough (repeat ad infinitum).


Why does any of this apply currently? We are where we are with the economy whether it is part of a cycle or not. Any lack of contraction under Labour is completely irrelevant what can or should be done today.

Also back in 2008 lets not forget the banking crisis was a game changer and so no one has any idea what Labour would have done without it and IIRC Darling was not going to let the government carry on spending anyway.

The second part is that much pseudo-Keynesian interest hangs off the idea of the multiplier, that if the government spends it will stimulate economic activity that will be multiplied throughout the economy, only problem is, in practice multiplier type effects are a bit of a myth. You could force banks to give £100 vouchers to every unemployed person in the country to spend in their local shops within one month of receipt, it would certainly pump money into the economy, but if those businesses just use the money to pay down their debts or increase their reserves you don't get much of a multiplier and you don't really get economic growth.


Well the government has been printing money pretty fast recently and this hasn't stimulated the economy. Things like a VAT cut and investment in social housing (which would help solve the ever increasing housing benefit bill) are not giving £100 vouchers but are more direct form of government action that I thik they should be taking at this time. Rather than giving a darn sight more than £100 to rich higher rate tax payers in the vain hope this will "trickle down".

So I'm not a fan of pseudo-Keynesians and I don't think much of multiplier myths that underly much of their thinking, it's all a bit silly. If people want growth then they probably need to lobby the Government to do things they may not actually like or want, things only governments can really drive, like commissioning big infrastructure projects: airports, strategic rail links, better roads etc, things that will keep facilitating economic activity year after year, but then those sorts of things are years in the making.


At the moment how would you tell a pseudo-Keynesians from a Keynesian? They would both be spending to invest in infrastructure. You could only tell the difference in several years time when (if) we emerge from the recession part of the cycle we are in now.
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DaveO wrote:
Why does any of this apply currently? We are where we are with the economy whether it is part of a cycle or not. Any lack of contraction under Labour is completely irrelevant what can or should be done today.


The economy would be in a different state now had Labour spent less (which they should have). That would have put us in a better position borrow the money we need to spend now. It doesn't help us, now the mistakes have been made, but Labour have to take their share of the blame for our current economic situation.

DaveO wrote:
Also back in 2008 lets not forget the banking crisis was a game changer and so no one has any idea what Labour would have done without it and IIRC Darling was not going to let the government carry on spending anyway.


None of this excuses Labour's overspending prior to 2008.
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