Almost £4b more in cuts coming in the budget.

[I1L2T3 10]

He's planning for it by cutting the deficit, he can't put money aside until its eliminated and we are in surplus.

 

In November's budget he benefitted from a £27bn windfall. He went on a mini spending spree.

 

He's missed practically all of his deficit reduction targets. He has already broken two of the three golden rules he set for himself.

 

As for the idea of putting money aside I can't believe Tories constantly and ignorantly level that criticism at Brown. How much did Thatcher and Major put aside from the oil and gas revenue? When has a Tory government ever planned to put money aside? They don't plan for it because they don't believe in it. They believe in balanced budgets not some kind of Keynesian surplus saving.

 

That said, I'm not sure what Osborne thinks he believes in. It's a complete mess.

[sutty27 10]

In November's budget he benefitted from a £27bn windfall. He went on a mini spending spree.

 

He's missed practically all of his deficit reduction targets. He has already broken two of the three golden rules he set for himself.

 

As for the idea of putting money aside I can't believe Tories constantly and ignorantly level that criticism at Brown. How much did Thatcher and Major put aside from the oil and gas revenue? When has a Tory government ever planned to put money aside? They don't plan for it because they don't believe in it. They believe in balanced budgets not some kind of Keynesian surplus saving.

 

That said, I'm not sure what Osborne thinks he believes in. It's a complete mess.

 

They can't win in your eyes, if they cut spending to save money you moan, if they don't save money you moan. What exactly do you want them to do, spend less and save or spend more and increase the deficit.

[L00b 441]

So, what would happen now if we had a rapid 8% contraction in GDP and loss of half a million jobs.

We have a reduced (and reducing) deficit, therefore spare capacity to borrow for emergency coping.

Has Osborne planned for it? Has he put money aside?

He's planned for it by getting a lid on the deficit bootstrapped by the previous administration to cope with the 2008 crisis.

 

He's not put money aside because (i) there isn't any to be saved whilst the country still has a deficit and (ii) he has done the lid thing whilst cushioning the country socio-economic base (such as e.g. spending that £27bn): we haven't had "austerity", by any objective measure.

 

If you have difficulty comprehending what "austerity" really is, ask the Greeks: in the GDP/debt ratio stakes, the UK and Greece started more or less peg level in 2008. Compare and contrast in 2016. Now they are a complete mess, I'll grant you that.

He probably would not have the first clue what to do.

By all accounts, much more of a clue than Brown and Darling.

 

For a start, he seems to understand that, on the one hand, magic money trees don't actually exist and, on the other hand, public spending cannot be cut severely overnight if the country is achieve and husband any measure of economic growth (precisely why he hasn't cut public spending severely overnight, such that the deficit is taking an age longer to bring down).

Edited March 18, 2016 by L00b

[foxy lady 10]

Have another read of my post. I'm not being selective at all. With the one exception mentioned, the economy grew faster in every n-year period leading up to 1979 than it did in the n-year period after 1979, for n = 1 to 35, according to the Bank of England's own figures.

 

I agree that the unions shot themselves in the foot, didn't always represent their members' (let alone the country's) best interests, didn't know how good they had it, etc. I also know people who still haven't forgiven them for their relatives' funerals being delayed, and I don't blame them at all, I would feel the same way.

 

But the economy always grew more quickly, on average, before 1979 than after. Furthermore, public net debt in 1979, as a proportion of GDP, was about half what it is today, and decreasing. [i'm no fan of New Labour, but it is funny how global events are always the fault of the UK when they're in power, but never are when the Tories are in power.]

 

Incidentally, on the subject of the IMF loan, the National Archives have a reasonably balanced take on this:

 

"Following the agreement with the IMF, the overall economic and financial picture improved. Interest rates were soon reduced and the pound quickly appreciated in value. By the end of 1977, partly as a result of new oil revenues, there were improvements in the balance of trade. Britain did not need to draw the full loan from the IMF. Nevertheless, the IMF crisis reinforced a change in policy orientation away from full employment and social welfare towards the control of inflation and expenditure."

 

Lots to discuss in there, though now is not the time (for me at least).

 

But then inflation in the period up to 1979 was always in double figures and often well above 20%, only coming down into single figures and sanity in about 1981/82. It's not a great thing for your savings or the economy even if the Prime Minister assures you "This doesn't mean the pound in your pocket is worth any less".

 

5% growth with 20% inflation isn't really much use.

[foxy lady 10]

Yup, that's why I quoted real (i.e., inflation-adjusted) GDP growth.

 

2% inflation isn't great for my savings either, if interest rates are only 1%

 

I assumed so. But it still isn't healthy if the money in your bank account is worth 20% less in December than it was in January and you have a 25% interest to pay on your motrgage.

 

Fortunately at the moment inflation is zero and I'm picking up 3% on bank accounts.

Edited March 18, 2016 by foxy lady

[foxy lady 10]

Nope, you didn't. You were comparing a 5% real growth with 20% inflation. In that case, nominal growth would be 25%.

 

No. I said 5% growth isn't good if you have 20% inflation. That is the work of a sick economy.

 

In the late 1970s this country had a sick economy. A nationalised British Leyland making rubbish cars with massive subsidy. Endless strikes. Power going off at regular intervals, and 20% inflation. Bags of rubbish piled up in the streets. That's not how a modern country works.

Edited March 18, 2016 by foxy lady

[foxy lady 10]

 

And your savings would be OK too, provided that the interest rate you were getting on them was above 20%.

 

 

But sadly it wasn't. I wasn't around at the time thankfully, but it seems that in 1975 most bank accounts didn't actually pay interest at all and building societies were paying under 10%.

[L00b 441]

That's an interesting observation. <...>

FWIW, I've frequently likened my perception and anticipation at the time to animalistic risk awareness: I could never put a finger directly and resolutely on one or several events, acts or other manifestations that made "crisis coming" glow neon-like in the night, it was more a gradual awareness of ever more compounding behaviours and circumstances all around, chiefly based on income vs indebtment differentials. To coin an analogy, it was a case of, say, that fabled frog slowly boiling in the pan, eventually noticing the temperature rising and realising it is in a pan, and jumping out.

 

So many colleagues, friends and relations on lower or equivalent incomes getting significantly indebted, with increasing frequency. Taking on 120% interest-only mortgages on multiples (in double digits!) of combined salary. All the while maxing (several-) plastic limits on overseas weekend trips and New York Xmas shopping, and changing cars (new ones) every year or two. <etc.>

 

Where was the money coming from? How were they ever going to pay it back, realistically? And these were mostly smart people, with MSCs and PhDs and whatnot.

 

It was all just fuelled from paper gains on real estate, real and not (people were buying property on plans and flipping them within days or weeks at a profit!), releasing equity with gusto before the first €1 of interest -never mind capital- had even been paid back.

 

Of course it could only ever end in tears. Big large salty ones. Wherever that game was being played...and it was pretty much everywhere I looked.

 

Then I got wind of Clinton's repealing of the Glass–Steagall Act in '99 and the penny dropped When the rumblings began in late 2007, I just knew then that the time for calling in the chips on the table wasn't far.

Edited March 18, 2016 by L00b

[ricgem2002 11]

But sadly it wasn't. I wasn't around at the time thankfully, but it seems that in 1975 most bank accounts didn't actually pay interest at all and building societies were paying under 10%.

bit like now then under the tories

[hyper 10]

FWIW, I've frequently likened my perception and anticipation at the time to animalistic risk awareness: I could never put a finger directly and resolutely on one or several events, acts or other manifestations that made "crisis coming" glow neon-like in the night, it was more a gradual awareness of ever more compounding behaviours and circumstances all around, chiefly based on income vs indebtment differentials. To coin an analogy, it was a case of, say, that fabled frog slowly boiling in the pan, eventually noticing the temperature rising and realising it is in a pan, and jumping out.

 

So many colleagues, friends and relations on lower or equivalent incomes getting significantly indebted, with increasing frequency. Taking on 120% interest-only mortgages on multiples (in double digits!) of combined salary. All the while maxing (several-) plastic limits on overseas weekend trips and New York Xmas shopping, and changing cars (new ones) every year or two. <etc.>

 

Where was the money coming from? How were they ever going to pay it back, realistically? And these were mostly smart people, with MSCs and PhDs and whatnot.

 

It was all just fuelled from paper gains on real estate, real and not (people were buying property on plans and flipping them within days or weeks at a profit!), releasing equity with gusto before the first €1 of interest -never mind capital- had even been paid back.

 

Of course it could only ever end in tears. Big large salty ones. Wherever that game was being played...and it was pretty much everywhere I looked.

 

Then I got wind of Clinton's repealing of the Glass–Steagall Act in '99 and the penny dropped When the rumblings began in late 2007, I just knew then that the time for calling in the chips on the table wasn't far.

yep, that's about the sum of it.

 

I blame 3 parties

- the govt at the time for not stepping in, but it would have had to be an extremely boroad shouldered chancellor to call an end to good times

- the financial services watchdog or whoever they are for not being on watch and curbing things

- the public who wanted shiney new cars and ever-bigger houses instead of feathering their nests for the future

[foxy lady 10]

bit like now then under the tories

 

I'm getting 3% from Santander and 4.5% from AIB. With inflation running at zero or thereabouts that's rather a good return.

[L00b 441]

You might find this speech by a leading banker interesting.

Great link CaptainSwing, thank you very much for this