The shame of Austerity Britain

allyg: It is I believe where the twenty first century will go: is going, economically protecting the inevitable continuously and changing people(s), affected by fast changing skill requirements, whilst efficiently preparing us for the next skill sets required. Rapid change, technology will aid all this until I believe there will be a basic ‘wage’ for all and work will be plus income

Interesting that you think a “Basic income” model will be implemented. There was a discussion about this on the politics threads a few months ago.
It might be an antidote to Austerity policies and help boost the economy.
It should give people a steady (low) income that helps cushion them from redundancies, zero hours contracts, retraining for new jobs, helps the self employed with fluctuations in income, encourage creativity, hobbies and community work in an era of turbulent employment fluctuations.
It could be a very positive idea. It could be funded by lowering the tax threshold (at perhaps the higher tax rate £45,000 pa?) so allowing people with higher incomes to pay back their “basic income” in tax.

I gather that there is a new US presidential candidate who advocates “basic income”. All very interesting!

United States: Andrew Yang is running for President in 2020 on the platform of Universal Basic Income

basicincome.org/news/2018/04/united-states-andrew-yang-is-running-for-president-in-2020-on-the-platform-of-universal-basic-income/

MaizieD, here is my long, cut and pasted response as promised earlier in the day. You start with:
“I don't understand why you are going on about austerity in Greece; you appear to have missed this sentence in my post Governments which control their own sovereign currency . The thread subject is about 'Austerity Britain' (a country which does have its own sovereign currency) and my post is about why the tory 'austerity' policy since 2015 has been completely unnecessary and why your 'maxing the credit card analogy' is completely false.”

Response:
“Deborah Mabbett and Waltraud Schelkle LSE European Institute”
“The choice of comparator countries does matter here. The UK has done nicely out of its monetary sovereignty, with the Bank of England now holding about £375 billion in gilts – 25-30 per cent of the debt stock, depending on how you measure it. But it has been able to do this without inducing a deep slide in sterling only because of the fortuitous fact that sterling remains a reserve currency. Sterling could have lost that status, but it was aided by the problems affecting other reserve currencies, including the dollar and the euro.”
blogs.lse.ac.uk/europpblog/2014/04/03/the-lack-of-monetary-sovereignty-is-not-the-reason-eurozone-countries-struggled-during-the-crisis/

“National economies are not like household or personal economies. This is just a myth promulgated by one set of economic theorists.”

Response:
Which set of economic theorists?

“Households and individuals have a finite amount of money. They cannot spend more than they have unless they are prepared to take on debt which they very likely cannot afford to repay (or even service in many cases)”.

Response:
Is this not the maxed out credit card/consolidation borrowing theory?

“Governments which control their own sovereign currency are not confined to a finite amount of money. They were in the old days of currency being pegged to the gold standard but that was abolished in the early 1970s.
They are not confined to a finite amount now. Nor are they actually obliged to borrow from anyone to finance their spending (though they still do to a certain extent by issuing government bonds).”

Response:
“Printing money and national debt”.
“Governments borrow by selling government bonds/gilts to the private sector. Bonds are a form of saving. People buy government because they assume a government bond is a safe investment. However, this assumes that inflation will remain low.
•If governments print money to pay off the national debt, inflation would rise. This increase in inflation would reduce the value of bonds.
•If inflation increases, people will not want to hold bonds because their value is falling. Therefore, the government will find it difficult to sell bonds to finance the national debt. They will have to pay higher interest rates to attract investors.
•If the government print too much money and inflation get out of hand, investors will not trust the government and it will be hard for the government to borrow anything at all.
•Therefore, printing money could create more problems than it solves.
•See also: Printing money and national debt”
www.economicshelp.org/blog/634/economics/the-problem-with-printing-money/

“The past decade has seen quite extensive use of Quantitative Easing (QE) whereby some £340+ billion has been created by the Bank of England, initially to cushion the economy against the international banking crisis of 2007/08.”

Response:
“In the liquidity trap of 2008-2012, the Bank of England pursued quantitative easing (increasing the monetary base) but this only had a minimal impact on underlying inflation. This is because although banks saw an increase in their reserves, they were reluctant to increase bank lending.
However, if a Central Bank pursued quantitative easing (increasing the money supply) during a normal period of economic activity then it would cause inflation.
Related
•National Debt, printing money and inflation
•Hyperinflation – causes, costs and examples”
Last updated: 10th July 2017, Tejvan Pettinger, www.economicshelp.org, Oxford, UK

“The objective of QE was to put money into the economy to keep it 'working'. Unfortunately it went mostly into the 'wrong' economy. Instead of going into the 'real', everyday economy (the one that you and I and most people exist in) through investment in infrastructure and new businesses (creating jobs and purchases which keep money moving around the economy and eventually returning to the treasury through taxation) much of it ended up in the financial markets, inflating bond and equity prices and making a lot of already wealthy people even wealthier.”

Response:
“The Bank of England brought its quantitative easing programme to a standstill last year, capping asset purchases at £435bn ($601bn). It has since indicated that the unwinding will begin when interest rates have returned to around two percent. The fact that QE is tried and tested is likely to mean that there is less reluctance to fall back on it in times of economic trouble. According to Reis: “I think that QE should be a tool that central banks use with some frequency in the future. It has proven to be effective at affecting financial markets and at providing signals about the future path of interest rates while having modest, if any, additional effects on actual inflation.” In any case, the big test of the coming months will be to redefine what is conventional for the central banks of the future.”
www.worldfinance.com/banking/the-qe-reversal

“We know that 'trickle down' doesn't really work. Wealthy people tend, on the whole, to put their money to work in the financial markets to make more money and then aim to pay as little tax on it as possible by squirrelling it away in tax havens. They may spend a bit more on high end goods and services but not enough to make a difference for most workers or businesses.”

Response:
Pension funds do too. This statement is all encompassing and may not be true that: “Wealthy people tend, on the whole, to put their money to work in the financial markets to make more money and then aim to pay as little tax on it as possible by squirrelling it away in tax havens”. What a generalization. I am sure some do, but really put some figures behind this statement or be more circumspect.

“There comes a point where restricting the money available in the 'real' market puts the cost of goods and services dependent on global market prices beyond the reach of 'ordinary' people and the businesses supplying these to the domestic market suffer loss of income which leads to cutting jobs and lessening the tax take from people's earnings and taxes on profits. Which makes no sense whatsoever.”

Response:
This growing clamour for an end to fiscal restraint has come on the back of news that the UK is finally running a budget surplus on day-to-day spending.
There is no doubt that this is a landmark achievement for the government. In 2010, the current budget deficit was nearly £100bn and this has now been wiped out – mostly thanks to the determination of George Osborne. It is easy to forget just how much pressure Osborne was under to abandon his fiscal consolidation plans. In the early part of this decade a chorus of voices, including the International Monetary Fund (IMF), proclaimed that fiscal consolidation was wrecking the economic recovery. Yet he broadly stuck to the course and the IMF has now concluded that Britain is much better off for it.
8 March 2018
By Daniel Mahoney @danielmCPS

But does the positive news on the current budget mean we can relax and loosen the purse strings? Timothy and others, including prominent backbencher Nick Boles, argue that now is the time for more departmental spending and greater government investment.The first thing to note is that there has already been a considerable amount of fiscal loosening since the EU referendum. These decisions will already cost the Exchequer nearly £60bn. Further extending this in a significant way would seem deeply irresponsible.
8 March 2018
Austerity worked – but that doesn’t mean we have money to spend
By Daniel Mahoney @danielmCPS

General information:
"Of course, this growing clamour for an end to fiscal restraint has come on the back of news that the UK is finally running a budget surplus on day-to-day spending.
There is no doubt that this is a landmark achievement for the government. In 2010, the current budget deficit was nearly £100bn and this has now been wiped out – mostly thanks to the determination of George Osborne. It is easy to forget just how much pressure Osborne was under to abandon his fiscal consolidation plans. In the early part of this decade a chorus of voices, including the International Monetary Fund (IMF), proclaimed that fiscal consolidation was wrecking the economic recovery. Yet he broadly stuck to the course and the IMF has now concluded that Britain is much better off for it."
8 March 2018
By Daniel Mahoney @danielmCPS

Mostly not my own work cut and pasted. Although I did the research, analysed the question and selected the response.
I agree with these views and opinions.

Sorry checker changed MaizieD to Mailed. It is for you Maizie.

Mailed Why are you so scratchy? We all have problems you know. No need to bring it on line.

. " mostlyharmless Sat 09-Jun-18 04:49:44
allyg "Economic austerity affects society, it is not political."
What does this mean?
You surely can't mean that on so many levels!
For a start economic policies are by definition political in that they influence political actions.
Secondly, anything that "affects society" is political."

Just a quick response Mh. "Economic austerity affects society, it is not political." You ask what does this mean.
It means that austerity is one tool used to control the economy to prevent economic collapse of markets, and economies of country's (depression). Recession, as we have gone through since 2008, was worldwide and could easily have slipped into depression.

The austerity tool affects society and has political consequences. So the definition you give "Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both." from Wikipedia is defining the term. The action of austerity measures and all other corrective instruments being used is triggered by economic conditions and in a recession is forced by outside economic factors. The choice of economic theory or theories, chosen to correct the economic downturn affects society and will have political consequences.

There are so many theories about how to handle such economic situation all of which might be chosen by any political persuasion in Government. Mainly the central Bank or in our case The Bank of England, which should be independent of political favour has enormous influence in how the economic instruments will be used, so non political corrective measures.
It is simplistic to put austerity down to politics. It is first and foremost a fall back situation to survival. The length, depth and type of recession will determine for how long austerity measure continue. At that point it becomes socio/economic/political. But my study of economics was part of other study so I am in no way knowledgeable beyond basic understanding.
It also seems that we are (world economics) is moving beyond a lot of the theories and actions used in the past. So as the cycle of recession moves from every 20 years, to every 10 years and possible if Schumpeter is to be believed ever closer upturns and downturns, we shall have to see more flexible sovereign debt actions. This of course places the Eurozone in particular danger.
All my own work.

Joseph Schumpeter (1883–1950)
“Schumpeter and the economists who adopt his succinct summary of the free market’s ceaseless churning echo capitalism’s critics in acknowledging that lost jobs, ruined companies, and vanishing industries are inherent parts of the growth system. The saving grace comes from recognizing the good that comes from the turmoil. Over time, societies that allow creative destruction to operate grow more productive and richer; their citizens see the benefits of new and better products, shorter work weeks, better jobs, and higher living standards.”

www.econlib.org/library/Enc/CreativeDestruction.html
Now, if you want a real discussion about politics, capitalism v other forms of economic/social control. No political group unless they understand this will govern their countries to survive economically or socially intact.

This is where we should start, with Schumpeter’s “perennial gale” of Creative Destruction. It is I believe where the twenty first century will go: is going, economically protecting the inevitable continuously and changing people(s), affected by fast changing skill requirements, whilst efficiently preparing us for the next skill sets required. Rapid change, technology will aid all this until I believe there will be a basic ‘wage’ for all and work will be plus income. Exciting, scary and the future. I will be long gone. How I wish I could go round again in these times.
All my own work. Gone off thread again!! Long post sorry.

What I think you are saying is that you don't regard my post to be relevant to what you said.

That's remarkably astute of you, Ally, considering that I've twice, myself, stated that I thought your post was irrelevant to the thread topic.

MaizieD. Thank you for correcting your posting day error I have now looked at the posting and will post a response later today.

It is very difficult to respond to your post if you say you "don't understand" and then you say "you understood it absolutely fine". What I think you are saying is that you don't regard my post to be relevant to what you said. I do. However I have done a very detailed and lengthy response using the words of "professional's" on the subject by cutting and pasting. Something to look forward to later to day.

MaizieD can't find the post your referring to on the 8th June at 20.59.

That's because it was on 7th June not 8th. My error.

Maisie if you don't understand my post. Don't bother responding.

I understood it absolutely fine. Just couldn't understand why you were posting something irrelevant to the thread subject.

Thank you for all your advice.

It's a pleasure.

allyg "Economic austerity affects society, it is not political."
What does this mean?
You surely can't mean that on so many levels!
For a start economic policies are by definition political in that they influence political actions.
Secondly, anything that "affects society" is political.

Austerity is a political-economic term referring to policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. from Wikipedia

"MaizieD Fri 08-Jun-18 23:21:14
AllygI have no idea what your post at 20.59 Thurs 8th June is meant to be saying. I don't know why you 'double quoted' (i.e my quote from your original post is quoted with my name on it)"

MaizieD can't find the post your referring to on the 8th June at 20.59.

Maisie if you don't understand my post. Don't bother responding. That way no one knows that you don't understand it.

Thank you for all your advice.

Allyg

I have no idea what your post at 20.59 Thurs 8th June is meant to be saying. I don't know why you 'double quoted' (i.e my quote from your original post is quoted with my name on it)

I don't understand why you are going on about austerity in Greece; you appear to have missed this sentence in my post Governments which control their own sovereign currency . The thread subject is about 'Austerity Britain' (a country which does have its own sovereign currency) and my post is about why the tory 'austerity' policy since 2015 has been completely unnecessary and why your 'maxing the credit card analogy' is completely false.

You may have nothing at all relevant to say in response to that, I don't know, but while bringing in completely irrelevant opinion on a country in the eurozone may satisfy your desire to denigrate the EU whenever possible it doesn't move discussion on the thread subject any further forward.

And would you please try to format your posts in such a way as to make them clearer. It's not difficult. Gnet has very simple instructions under the 'reply' box.

Thanks for the link Mh.
JRF reports are always sad reading and very informative.

This one had one small light at the end of the tunnel the destitution figures since 2015 had dropped by 25%.
We should not be complacent though, for those classified as destitute including on third of those migrants (some born in the UK) the figures are still unacceptable. But a reduction means something is improving or being done right, we should encourage the continuation of this.

"MaizieD Mon 04-Jun-18 10:35:44
Austerity is not a political decision it is an economic one. It's like one of us living high on the hog on our credit cards, then borrowing to consolidate and still using the credit cards.....it's then either Bankruptcy or some serious austerity measure to save us from economic disaster."

Austerity is an economic decision, not a political one. The maxed out credit card might be "old hat", nevertheless if a Country has austerity thrust upon it with EU rules connected to the failure of the Euro, which affects 28 Countries, all at the same time when a world recession hit in 2008. If the 27 had their own currency, they each could take action as we did to defend their currency as best suits them and quickly. The UK had additionally to assist the Eurozone to bail out the Euro. All in the sinking boat, not a good idea. All the EU countries were hit with austerity measure including us.

Did someone once say it's the economy s----d. Not something I would say and not nice but I agree with the sentiment.
Thank goodness we have a benefit's system, NHS, GP's free prescriptions for low income, disabled, or elderly people on benefits.

In Greece they had no medicines, not even paracetamol, let alone complex drugs like heart, cancer and other life essential treatments. Food shortages, empty shelves, multiple business went to the wall. Banks not opening, no ATM all to stop a further run on the Banks who had no money. The Eu is now reaping the results of imposing austerity with Greece, Italy, Hungary and Slovakia and even Germany have a coalition government. Economic austerity affects society, it is not political.

Yes, I remember the anger at the time from selling off our gold reserves so cheaply.

allyg
Full report:
www.jrf.org.uk/file/51368/download?token=eILZejT6&filetype=full-report
Summary:
www.jrf.org.uk/file/51369/download?token=VO799W5l&filetype=summary

Jalimal. Half the gold reserve was sold at rock bottom price, at seventeen auctions. The cost was 7 billion to us the tax payer. Gross error by the Labour Government when Brown was the Chancellor. The money raised was poor and was spent buying other currencies.

As I understand it the gold reserve of any country can be used as collateral and since the price of gold (unless something goes wrong such as Brown announcing his sale and the price dropped like a stone naturally) the gold reserves are pretty much aligned and stable and have a book value, just as they would in a company. Don't have details but you can find lots of information about that time.
Gold reserves are important. Just take a look at the US.

"mostlyharmless Thu 07-Jun-18 19:03:54
This sounds Dickensian.
The Joseph Rowntree Foundation report on U.K. Destitution (June 2018)"

Have you got a link Mh?

This is how JRF defined Destitution:
People who have lacked two or more of six essentials over the past month, because they cannot afford them:
• Shelter (have slept rough for one or more nights),
• Food (have had fewer than two meals a day for two or more days),
• Heating their home (have been unable to do this for five or more days),
• Lighting their home (have been unable to do this for five or more days),
• Clothing and footwear (appropriate for weather) and
• Basic toiletries (soap, shampoo, toothpaste, toothbrush), or
• Had an income that was so low, and no savings, so that they would be likely to lack these essentials in the immediate future

This sounds Dickensian.
The Joseph Rowntree Foundation report on U.K. Destitution (June 2018)

It is unacceptable that in our society approximately 1,550,000 people, 365,000 of them children, were destitute in UK at some point over the course of 2017.

This means that they could not afford to buy the bare essentials that we all need to eat, stay warm and dry, and keep clean.

The report concludes that destitution is usually caused by low pay or low welfare benefits, sanctions on benefit claimants and having to pay off large debts.

Lemongrove
I did mean 20K.
You have to live in the big cities to earn 100-200K. The same jobs in the sticks pay much less.
Many families are struggling on 10-20k . That is the wealth gap. We have to get rid of zero hour contracts. They suit students but families cannot survive on them.

Surely maizie you’re not suggesting that people like the charming Jacob Rees-Mogg, entrepreneur James Dyson and generous Tory donor Crispin Odey have ulterior motives for being determined to get us out of the EU before the new tax avoidance directive comes in?
What was that date again? March 2019 did you say?

I don't know... it only mitigates it slightly for me, ilovecheese. They could still be using tax havens and tax avoidance schemes. I'd rather see a level playing field for the filthy rich

To be fair though, whoever it was who said they were relaxed about the filthy rich (Alistair Darling? Peter Mandellson?) did add
"as long as they pay their taxes"

Gold reserves have very little bearing on the nation's economy, Jalima. We are no longer on the 'gold standard' where our currency was valued against the amount of gold we held. As far as I can see, gold reserves are only relevant to the financial markets.

Perhaps you can explain how they affect the 'real' economy. This is a genuine request.