The 213 global economic outlook

December 26th, 2012 at 6:28 am by David Farrar

Kamal Ahmed at Sunday Telegraph writes:

The CEO said he had been reading a new paper from Boston Consulting Group headed “Ending the era of Ponzi finance”. The lessons he had taken from it were miserable.

The West was not going to find its way to the right economic path with a little tweaking at the edges, the CEO said. What is needed is a wholesale overhaul of the economic system to tackle record levels of public and private debt. Was anyone brave enough to do it, he wondered aloud.

The level of public debt especially is unsustainable in many countries.

That debt was not used to fund growth – perfectly reasonable – but was used for consumption, speculation and, increasingly, to pay interest on the previous debt as liabilities were rolled over.

As soon as asset price rises – fuelled by high levels of leverage – levelled off, the model imploded.

The issue is brought into sharp focus by one salient fact. In the 1960s, for every additional dollar of debt taken on in America there was 59c of new GDP produced. By 2000-10, this figure had fallen to 18c. Even in America, that’s about a fifth of what you’ll need to buy a McDonald’s burger.

Borrowing for capital to grow is good. Borrowing just to fund unsustainable spending is bad.

Coupled with the huge debt burden are oversized public sectors and shrinking workforces. The larger the part the Government plays in the , the lower the levels of growth.

A report by Andreas Bergh and Magnus Henrekson in 2011 – cited by BCG – found that for every increase of 10pc in the size of the state, there is a reduction in GDP of between 0.5pc and 1pc. Across Europe, the average level of government spending is 40pc of GDP or higher, and is as much as 60pc in Denmark and France. In emerging markets, it is between 20pc and 40pc. This gives non-Western economies an automatic growth advantage.

The size of the state does matter.

What does the West need to do to right such fundamental imbalances?

Mr Stelter and his colleagues do offer some solutions. First, there has to be an acknowledgement that some debts will never be repaid and should be restructured. Holders of the debt, be they countries or companies, should be allowed to default, whatever the short-term pain of such a process.

In social policy, retirement ages will have to increase. People will have to work harder, for longer and should be encouraged to do so by changes in benefit levels that do little – at their present level – to reward work at the margin.

The size of the state should be radically reduced and immigration encouraged. Competition in labour markets through supply-side reforms should be pursued.

All policies I agree. The competition in labour markets is a crucial element.

Where governments can proactively act – by backing modern infrastructure – they should. High-growth economies are built on modern railways, airports, roads and energy supplies. Allowing potholes to develop in your local roads is a symptom of a wider malaise

No economy has done well by neglecting roads.

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53 Responses to “The 213 global economic outlook”

  1. mikenmild (8,721 comments) says:

    ‘No economy has done well by neglecting roads’. Absolutely, so the government should abandon roading projects with negative benefit-cost rations and invest that capital more sustainably.

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  2. Lee C (4,516 comments) says:

    Quelle surprise! A right-wing think tank has come up with the solution for the excesses and abuses of the neoliberal clusterfuck.

    Is it recommend to recommend that the people who run these schemes be jailed, made to pay it back, made to stay on and accept the consequences of their mismanagement, or that laws be asserted to make such abuses so untenable that it make is very unattractive to potential swindlers?

    Is it about regulating the banks that are out of control with their interest-gathering schemes, mortgage rip-offs and systems governments that tax working folk to the gonads, while they allow the miniscule minority of very rich to abuse the same systems?

    No. Of course not.

    Let’s go for the real source of the problem. The poverty-stricken and average Joes and Joannes who are already working two jobs to simply feed and clothe their kids, and those trapped in benefits systems because employers are encouraged to pay so little that it’s uneconomic for people to come off them.

    Meanshile, the rest of us with jobs now should ‘work harder’ and ‘longer’ and look forward to a longer term of work, so the fat cats can continue to enjoy their days at he beach or on the yacht, courtesy of the obscene kinds of bonuses they realise for rorting the rest of us.

    ‘In social policy, retirement ages will have to increase. People will have to work harder, for longer and should be encouraged to do so by changes in benefit levels that do little – at their present level – to reward work at the margin.’

    Why not stop fucking around at the periphery, just finish the job, and simply reinstitute slavery?

    All this classic of arrogant, misdirection – a black-hole of condensed bigotry is missing – is canned laughter.

    Joyeux Noel, slaves.

    [DPF: If BCG is a right wing thinktank, then how do you explain David Cunliffe worked fo BCG?]

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  3. bringbackdemocracy (349 comments) says:

    Balancing budgets
    Reduced Government borrowing
    Investing in Infrastructure
    Reducing the size of the public service
    Increasing the age of retirement
    Sounds like the Conservative party manifesto at the last election

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  4. dog_eat_dog (674 comments) says:

    Anyone who tries to explain away the BCG as a right-wing think tank shows just how much their opinion is worth straight away.

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  5. gravedodger (1,426 comments) says:

    Wonder whether BCG wrote the stupid bits, or the journalist.

    18c of growth for every dollar spent. Which is one fifth of a McDonalds burger. No it’s not, since there’s about 15 trillion of those dollars of spending. So about 3 trillion in growth. Which is about 1,000 aircraft carriers, to pick another pointless stat. And is that annual growth or total over ten years?

    Every 10pc increase in size of state reduces GDP by 0.5 to 1pc. Per annum or total. I suspect per annum. This stuff actually matters in any attempt to have a serious conversation. This is why NZ newspapers aren’t part of any serious conversations – their journalists are too stupid.

    And Lee , the left mostly created the mess we’re in through a combination of overspending, guaranteeing mortgages, and bailing out failing firms.

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  6. SPC (4,609 comments) says:

    Does the BCG propose any actual changes to the economic system?

    There is only an affirmation of the political budgetary course already being applied by governments.

    Allowing governments and companies to reneg on their debts is not a change to the economic system – it’s an implied criticism of the bail out of Greece. Given the same governments are also bailing out banks this is a cart and horse, horse and cart argument.

    The hypocrisy of the report is that after taxpayer bail out of banks, other companies should share in this (taxpayer financed)largess, while people dependent on governments should have their entitlements cut to make minimum wages into one’s 70′s more attractive.

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  7. hmmokrightitis (1,458 comments) says:

    Thanks for the quote DPF – ” Allowing potholes to develop in your local roads is a symptom of a wider malaise”

    Next time you roll out the local government bad, central government good meme, Im going to wave this flag. Anyone care to speculate how much of NZ’s road network is actually looked after by local councils? And the costs involved in doing that? And how much more responsibility has been passed to LG by CG, under the current blue watch – with funding not even starting to match the additional responsibility. So, IOW, forcing councils to raise rates, whilst CG keeps more tax money and does less.

    Nice. Oh to be a politician with the ability to rort the system that way huh DPF?

    Oh, and weddy, just for you. Next time you think Im left because Im not a right as you, stick this in your thinking pipe and smoke it.

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  8. duggledog (1,102 comments) says:

    Looking forward to some golden comments on this thread from the leftards

    ‘People will have to work harder, for longer’

    No shit! How about just work, period?

    We’ve entitled ourselves into a bit of a corner here. I hear that some folk not only get weekends off, they get 4 weeks’ paid holiday, a week’s paid stats, sick leave, maternity leave, time off for lunch, ciggie breaks. It sounds super.

    I know a chappie who has somehow got himself into NZ from one of the poorest countries in Africa; already he can see we cannot really afford all of our fabulous accoutrements. He can’t believe people aren’t happy with their lot in this country and thinks we are nice, but like spoilt children.

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  9. Pauleastbay (5,030 comments) says:

    Gravedodger,
    You should know by now nothing shuts a thread down faster than accurate ,factual, sensible information, mind you it probably won’t stop a couple of wet dreamers making shit up but thats lefties for you

    and Lee

    http://en.wikipedia.org/wiki/Boston_Consulting_Group I think dog-eat dog was trying to say in a really nice way, far to nice really, you have no idea what the hell you are talking about

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  10. orewa1 (425 comments) says:

    The size of the state in terms of GDP is irrelevanT. The issue is what the citizens get for their tax, and whether such services are more efficiently delivered by the public or the private sector.

    Take NZ. I pay oodles of tax, but it goes on the ‘wrong’ things. The health system is crap so I spend ?70 a month on private health insurance. The schools are poorly resourced so either my kids go to expensive private schools or I pay compulsory usurous ‘activity fees’ which are school fees in all but name.

    Some countries deliver social services far better than NZ does at very little more cost. The benefit of the extra tax more than compensates for health insurance or school fees. Citizens are happy.

    Meanwhile our taxes get squandered increasingly on Treaty claims, bribes to MMP politicians, and largesse to the Ruling Classes.

    New Zealand was a far better country before right wing extremists gained ascendancy. Sadly it will take a long time to regain our prosperity in their wake.

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  11. orewa1 (425 comments) says:

    Correction – $700 a month for health insurance.

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  12. wat dabney (3,422 comments) says:

    orewa1, you appear to be extremely confused.

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  13. PaulL (5,774 comments) says:

    orewa1: care to name some countries that deliver social services more efficiently than NZ in aggregate (I’m sure there are some that deliver point services better, I’m not convinced there are any governments that are substantially larger as a % of GDP that are much more effective).

    Whilst in theory the effectiveness of govt has nothing to do with it’s size, in reality there is a very strong correlation. My suspicion is that when the govt is spending a large proportion of GDP they start getting lazy with spending, and spend money on stupid crap. The population are too used to politicians wasting their money and don’t raise the hue and cry they should.

    I also think that governments that appear efficient (i.e. nobody complains too much) actually tend to have massive middle class welfare. This keeps most people quiet – the poor are getting paid, the middle class are getting paid (with their own money) and the rich are either hiding their money to avoid taxes (and keeping quiet so nobody notices), or are leaving. And amongst all that the economy is generally going to crap, and nobody talks about it. Or perhaps you just borrow money against the income of future generations in order to keep paying off the middle class today.

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  14. Paulus (2,289 comments) says:

    People continually complain – especially those on the left as to the hours people work.

    Many years ago I was taught that irrespective of the hours you work is nothing compared to what you put into those hours.

    It increasingly appears that too much time is taken on extraneous activities at work, not conducive to the job, for which people are employed.

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  15. Redbaiter (6,463 comments) says:

    a lot of the redistribution in Washington (localize it to Wellington if you like) is from taxpayers to a pampered elite.

    The government is redistributing wealth up, too – especially in the nation’s capital. …Two decades of record federal spending and expanding regulation have fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area.

    …Direct spending by the federal government accounts for 40 percent of the area’s $425 billion-a-year economy. …Roughly 15 cents of every dollar from the entire federal procurement budget stays in or around the government’s hometown, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University.

    “We’re seeing an enormous transfer of wealth from taxpayers to the Washington economy,” said Fuller.

    Washington-area workers with incomes above $100,000 rose to 22 percent of the workforce, up from 14 percent in 1990, adjusted for inflation, a Reuters analysis of Census data found. …there are 320,000 federal jobs in the Washington area.

    Within the District of Columbia, 55 percent pay $100,000 or more. …Nearly 13,000 lobbyists registered with the government last year and reported $3.3 billion in fees, or about $260,000 per lobbyist. That’s 22 percent more lobbyists and 37 percent more inflation-adjusted revenue per lobbyist than in 1998…

    Times are flush for Washington lawyers as well. The number of attorneys in the area has risen 44 percent, twice the national rate, to 41,000 since 1999. Their average income, adjusted for inflation, rose 35 percent to $156,000.

    …the D.C. region already has a reputation as one of the most affluent in the country. But the area is fast emerging as a home to the truly rich as well. High-end luxury retailers are responding. Brands such as Aston Martin are expanding their operations into the area — betting, for instance, that there will be plenty of customers who can afford the $280,000 sports car James Bond drives in the movies.

    …Already there are 500 Aston Martin owners in the area with the potential for more.

    Milton Pedraza, the CEO of the Luxury Institute, a research and consulting firm, said that purveyors of luxury goods are drawn to the area because it has…a stable economy bolstered by the federal government. Government contracting, where some local entrepreneurs and business owners amassed their fortunes, has been a key driver of the region’s economy for three decades.

    A third of the region’s gross regional product still comes from federal spending… “Let’s face it, the only place with money during the recession was Washington, D.C.,” Pedraza said.

    http://finance.townhall.com/columnists/danieljmitchell/2012/12/25/while-much-of-america-suffers-with-stagnation-washingtons-political-class-is-having-a-very-merry-christmas-n1473636?utm_source=thdaily&utm_medium=email&utm_campaign=nl

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  16. NeutralObserver (91 comments) says:

    Well the Govt spends in 3 days on health, education and social welfare more than it spends on the rest of the public sector in a year. That is where any savings are really to be made – and that is electoral suicide. What I don’t get is 30 years after the key reforms all we still manage to really export in volume is milk and dead cows. Where the hell are our decent entrepreneurs giving us a growing economy. Where is the private sector?

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  17. berend (1,599 comments) says:

    And how much of this has National implemented? About 0% I say. Debt has sky rocketed under John Key, none of Labour’s extremely harmful tax policies (WFF) are rolled back, and we haven’t heard a word about “National is not about increasing taxes” since 2008. No National MP would recognise a principle even if it hit them in the face.

    And the only defence of National I’ve heard is that Labour would be worse. Yeah right.

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  18. SPC (4,609 comments) says:

    Extremely harmful … National proposed tax cuts greater than the budget cost of WFF in 2005.

    The only difference is the WFF bureaucracy in collecting the tax revenue and returning it in tax credits.

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  19. Andrei (2,428 comments) says:

    The West is finished, you only need to look at the mediocrities who are in positions of leadership and the crap they are selling to see that.

    David Cameron’s so called “Conservatives” and the nonsense they are up to, Homosexual “marriage”, for example, which is not an investment in the future (ie children who will grow to be the productive citizens of the future but an investment in middle aged or elderly , middle class sodomites).

    Dynamic masculinity suppressed and bullshit promoted as veracity by substanceless wimps.

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  20. bringbackdemocracy (349 comments) says:

    David Cameron is losing a lot of support over his stance on homosexual marriage.
    http://blogs.telegraph.co.uk/news/jameskirkup/100194693/ukip-the-conservatives-and-the-real-threat-to-david-cameron/

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  21. Scott1 (357 comments) says:

    I think their analysis of immigration is flawed.

    first is is not clear that immigration (all things considered) helps GDP – the first study I discovered indicated it lowers GDP slightly.

    second, GDP isnt the measure that matters – it should be GDP per capita or similar – and since immigration increases the population the effect there is obvious.

    third if a state is rational it is already letting in immigrants that are clearly going to increase GDP. this means the additional immigrants that would be let in in a marginal policy wiht be those with lesser benefits to the economy so a current economic policy might indicate positive benefits to immigration (or not) and still show highly negitive returns on a marginal increase in immigration.

    the moral choice regarding allowing of immigration and free movement of people being a seperate issue.

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  22. Ross Miller (1,624 comments) says:

    Hmmmmmmmm Berend, resident ACT Party apologist, talking about ‘principles’ …. funny that. Bit like Labour and balanced budgets or Winston First on Trusts.

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  23. Lee C (4,516 comments) says:

    Ok, dogeatdog, and Pauleastbay I stand corrected on the ‘right wing think tank’ crack, a glance a wikipedia would dispute this.

    But as grateful as I am that you are being as nice as you to me, honesty do you think the rather Pollyanna -esque patina of the BCG actually glosses over the way that ordinary everyday people are once again being expected to prop up a failed system with their own blood, sweat and tears?

    Given they are an ‘employer people sould like to work for’ wouldn’t it be nice to see some ethical spine from them and some kind of acknowledgement that in-breeding and corruption in the financial sector has had a part to play in our recent problems, instead of engaging in sniffy blaming of beneficiaries and calls for those ‘on the margins’ to ‘work harder’ and longer?

    If you guys can’t see their analysis messed up and rather politically biased , well, I can’t think of what else to say here.

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  24. PaulL (5,774 comments) says:

    Lee C, you’re totally missing the point.

    The wealthy are not massive consumers of govt services nor govt money. The key problem that the west is facing is that our governments spend more than they collect in revenue. They cannot significantly increase revenues by taxing the “rich” as the rich already pay a fairly large slice of tax. The middle class are disinclined to pay more tax, and are the largest voting slice.

    So what to do? Continue until the entire west is bankrupt, rather than just pieces of it? Increase revenues by taxing the middle class more? Or get rid of low quality government spending?

    Anyone with any sense knows which we’re going to end up doing. But whilst people like you prattle on about right wing policies being the cause (when blind freddy can see the overspending was done by left wing governments) then we won’t get a sensible answer, and the problem will continue to get worse.

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  25. orewa1 (425 comments) says:

    PaulL-check out a range of European economies -Denmark and Sweden for starters.

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  26. hinamanu (2,352 comments) says:

    SILVER….SILVER…..SILVER

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  27. hinamanu (2,352 comments) says:

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  28. Yoza (1,334 comments) says:

    PaulL 11:45 am: “Lee C, you’re totally missing the point. The wealthy are not massive consumers of govt services nor govt money.”

    The wealthy/corporates are the primary beneficiaries of all state activity in the West, without the state they could not function effectively, if at all. John Dewey understood this when writing, “As long as politics is the shadow cast on society by big business, the attenuation of the shadow will not change the substance.”

    As the system is rigged to serve the interests of the rich and powerful, turning the screws on those from whom the rich and powerful extract their spoils will alter little.

    More than anything banking and financial institutions need to be removed from private ownership, as long as these usurious toads are allowed to exercise a disproportionate influence over the global economy the current economic disasters will continue with increasing magnitude and frequency.

    The only thing the article/BCG rant got right was GFC II is probably just over the horizon. More bank bail-outs, yay!

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  29. Pauleastbay (5,030 comments) says:

    Jesus Yoza its nearly 2013 your cloth cap bullshit might have gone down a treat in 1932 by goodness but not now. The last time I heard anything like you have just written above was off those poor sad bastards flogging the Daily Worker up on K Road.

    The Central Soviet bank was such a cracking success, right? Keep your shit for the sad pricks who pay your wages through their deductions to your union.

    But then again thinking like yours assures me that we will not see a labour government possibly never again this is entirely possible given most of the currect loosers there think similiar to you.

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  30. kowtow (6,684 comments) says:

    “…..immigration encouraged.”

    Why on earth would you do that. Increased social housing costs,unemployment ,social welfare,ghettoisation,crime ,failure to integrate etc.

    Not to mention indigenous citizens have never been consulted in the democracies that are being overwhelmed by these problems.

    Spain has granted huge numbers of illegals amnesties,now has record unemployment and can’t afford social spending for it’s own people. Doesn’t make sense.

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  31. hinamanu (2,352 comments) says:

    The Blame Game For the Global Financial Collapse: Fingers are pointing to one woman –Blythe Masters

    You won’t find her on Fortune’s list of the 50 Most Powerful Women in Business
    but Blythe Masters may go down in history as the woman who is responsible for the 2008 collapse of global financial markets. You can’t get more powerful than that.

    When I started researching credit default swaps –the financial vehicle that Blythe Masters is credited/blamed for inventing and which Warren Buffet described in 2003 in his annual letter to shareholders as ” financial weapons of mass destruction,” my image of its originator was definitely not pink.

    So sure was I that the culprits were testosterone-driven venture capital types, that before I had the facts, I had already begun my mental argument of why a woman would never have come up with a scheme that could bring global markets to their knees.

    So much for fact-less based arguments. I have been working under the false belief that women have different values then men in corporate America. Not so, according to a 2003 article written by Arianna Huffington- Would Things Be Any Different If Women Ran Corporate America?

    Clearly, the mere presence of more women in positions of power will not, by itself, be enough to guarantee a change in corporate behavior. Given the current business culture, the temptation for piggish behavior is far too great for both genders. And, in any case, we can’t wait 20 years to find out if an infusion of estrogen would clean up the corporate muck. So we’ve got to get out the hoses today and wash down the entire corporate establishment without fear or favor. If something better — more ethical, more honest, less narcissistic — can rise in its place, then I, for one, wouldn’t care if it were dominated by men, women, or chimpanzees of either sex.

    During the five years since Buffet’s warning about credit default swaps and Huffington’s assessment of business women behaving badly, things have gone from bad to worse.

    This has been a good lesson for me about the danger of generalizations and the power of the butterfly effect–because if there is anything that can be said about the current global financial collapse it’s that the butteflies have been flapping their wings.

    The theory behind the butterfly effect is that the fluttering of butterfly wings can create tiny changes in the atmosphere that ultimately alter the path of a tornado.

    http://www.blogher.com/blame-game-global-financial-collapse-fingers-are-pointing-one-woman-blythe-masters

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  32. wat dabney (3,422 comments) says:

    the system is rigged to serve the interests of the rich and powerful

    No, it is rigged to serve the interests of politically-organised special-interest groups: a crucial distinction. And the irony is that it was the left who created this situation, intent as it was on giving the state all the powers it needs to plunder and “redistribute.”

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  33. UglyTruth (2,989 comments) says:

    Australian economist Steve Keen is amongst a growing group of economic renegades who believe things are so far gone with the global economy that a debt jubilee and a total reset of the financial system is required.

    http://www.scoop.co.nz/stories/HL1204/S00101/debt-jubilee-for-new-zealand-the-great-reset.htm

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  34. wat dabney (3,422 comments) says:

    Yoza,

    Milton Friedman explains how the left is the problem when it comes to special-interest groups plundering the rest of us:

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  35. UglyTruth (2,989 comments) says:

    Did the left “lose” 2.3 trillion like the US Administration did?

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  36. Pauleastbay (5,030 comments) says:

    Uglytruth
    From Stevie’s wiki

    Steve Keen
    Steve Keen is a professor in economics and finance at the University of Western Sydney. He classes himself as a post-Keynesian, criticizing neoclassical economics as inconsistent, unscientific and empirically unsupported.

    He also gives credit to Marx for contributing to the “financial instability hypothesis” of Hyman Minsky.[1] His recent work mostly concentrates on mathematical modeling and simulation of financial instability.

    Another economic genuis just twiddling his thumbs until he is offered a job running the world or socailist twerp that never has to fear that anything he preaches will actually be put into practice because its been tried and failed everywhere.

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  37. UglyTruth (2,989 comments) says:

    Or you could try an ad hominem.

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  38. Reid (15,498 comments) says:

    I don’t think anyone sensible can argue the 90′s and the noughties have been Capitalism’s finest hour, but I also don’t think anyone can sensibly argue what has happened is Capitalism’s fault.

    See, the GFC occurred because powerful forces from Clinton’s time through Bush 43 and continuing with Obama have operated consistently to produce what we see. With Greenspan and Bernanke playing their vital parts, combined with a Congress asleep at the switch or more likely, simply bribed to look the other way, both the institutions like the Fed AND the regulators like Congress and the SEC have ALL looked the other way at best or deliberately at worst, taken actions or omitted to take actions which could have avoided this GFC debacle and disgrace.

    For actions like repealing the Glass-Steagall Act and for omissions like Bush failing to take action on sub-prime even when a few dozen state Attorneys-General were urging him to (Bush actually used an obscure mechanism to close that down – go figure). And the disgrace crimes continue, with Obama.

    Anyone who’s sensible with a 3-digit IQ can see from the actions which occurred over the last two decades, that this is NOT a partisan issue. Both sides are responsible. Anyone who thinks “their” side isn’t, is kidding themselves and needs a lesson in basic economics.

    And the key to knowing what’s going to happen next in the GFC from which we haven’t emerged, despite what the MSM would like to and does pretend, is knowing what caused it in the first place. And when you know that, you will know that while BCG is correct in its prognosis, it is just plain wrong in its diagnosis and it’s consequent suggested treatment. Possibly this is because it no doubt gets a hell of a lot of consulting fees from the oil and banking/finance industries both of whom heavily rely on arbitrage, who the hell knows and who cares, but the point is the report is wrong because it operates from a false premise. The premise being that the fiat-currency fractional-reserve banking system the entire globe* operates isn’t broken.

    Except Iran and North Korea (and it used to be Iraq and Libya).

    It is. Broken that is. I’m not going to bother explaining why, it’s too complex to cover in a blog post. Anyone with a 3-digit IQ can find out for themselves by driving google. Happy to help with a few keywords if required. But the point is, unless and until the flaws in that model is publicly debated and replaced, anything else is merely munting at the edges, which is what BCG is doing, by munting on about public and private debt ratios.

    And because this model has been operating for simply generations, people have forgotten it didn’t used to be like this, and have conflated fiat-currency fractional-reserve banking, with capitalism. They have forgotten, or never bothered to acquaint themselves with the fact the US only introduced income tax around the time the Fed came into being, for example, which was 1913. No income tax existed until the early 20th century in the US. And last I heard, capitalism did fine in the 17th, 18th, 19th centuries, didn’t it.

    To the lefties, if we had that model now, OF COURSE WE WOULDN’T HAVE THE CRUELTY WHICH EXISTED BACK IN THOSE DAYS WHICH WAS A RESULT OF THE MORE OF THOSE TIMES. DER. OF COURSE WE WOULDN’T. TO SUGGEST OTHERWISE IS MENTAL. So please don’t try to argue that point, there’s a good lefty.

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  39. Pauleastbay (5,030 comments) says:

    Uglytruth

    I certainly hope it was better than a “try”, I was wanting to absolutely attack the man

    The thing is Ugly lots of “renegades” are just the disaffected who sometimes are lucky enough to get a bit of air time,.

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  40. Pauleastbay (5,030 comments) says:

    University of Western Sydney In 2007, the University was ranked 24th among Australian Universities

    Uglytruth – looks like Steve has 23 better universities to apply to for a job when his “renegade” period is over.

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  41. UglyTruth (2,989 comments) says:

    Paul, an ad hominem is a logical fallacy. The more the system screws people over, the more people are going to be disaffected. A jubilee arguably has basis in common law and the seven year “sunset clause ” for civil debt.

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  42. Pauleastbay (5,030 comments) says:

    No Ugly, I was attacking the man pure and simple, it wasn’t a circumstantial ad hominem.

    mathematical modeling and simulation of financial instability thats what his recent work is about (I have no idea what it means) but I do know that models are notoriously inaccurate, just look at the Global warming models.

    Steve would get a bit more of my time if he put his cash up, started his own business and put his theories to work rather than fuck around on a computer whilst taking NSW tax monies.

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  43. Reid (15,498 comments) says:

    Paul, an ad hominem is a logical fallacy.

    No it’s not you stupid mental.

    Now, what was logically fallacious about that UT?

    P.S. You’re not really a stupid mental, I was just making a point.

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  44. Lee C (4,516 comments) says:

    Well I’ve looked at the substance of the arguments here and have to conclude I was not wrong.

    I did not blame capitalism, per se. I did blame neoliberalism in point of fact. I did not say that welfare was a virtue, but I did highlight how it has become a subsidy for exploitatative institutions which stymie peoples’ ambitions, whereas the Big Friendly Giants want to blame ‘ordinary’ people for sucking the life out of economy. In my view, every civil servant now unemployed under a government ‘tightening’ our belts (while finding wads of cash down the back of the sofa to bail out fraudulent finance companies) is one less bread-winner out there spending and redistributing/stimulating Kiwi and international trade/business.
    We ask for more roads. Can people afford to travel on them? Is the cost of living going down, after the ‘tightening’ of the belts?

    has it made one iota of difference to you, or your family?

    No. But it sure padded some peoples’ pockets; just not yours.

    The neoliberal ethos has been hammering on about this public spending strawman for the past five years and every time we get an informed source telling us to ‘cut back’ ‘work harder’ ‘put off retirement’ ‘get another job’ to supplement the main one, overlook employee rights, sell your daughters, drag the old folks out onto the ice, lock up your kids, blame video games – in fact, do anything but actually point the finger at the speculators and parasites who have brought this disaster around our ears.

    Instead we act like Moses has just come from the mountains when we read some ideologue once more trot out hackneyed blame-phrases targeted at those ‘on the margins’ or ‘on welfare’ or ‘not working hard enough’ which later will be treated as gospel and waved around as justification for the next round of economic policy designed to suck the blood out of ‘common folk’ and ‘redistribute’ it to the miniscule percentage of very rich ones at the top of he heap.

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  45. Pauleastbay (5,030 comments) says:

    Lee

    The more civil servants laid off the better, surely with the skill set obtained after years of working for the government they will immediately find positions in the private sector paying vastly higher salaries than they got whilst aiding and assisting New Zealanders with civil service OR will they find that civil servants are generally paid a shit load more than those flogging themselves out in the real world with no where near the benefits that they receive from their civil service – is that perhaps why so many of them sit and do bugger all for their entire lives and are never called upon to produce?

    Working harder is not a bad idea Lee, it might catch on

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  46. Pauleastbay (5,030 comments) says:

    and Lee

    When our welfare system was set up as “cradle to the grave” it wasn’t meant as a vertically integrated company where you are dependent on the government from the time your swede pokes out until the last spade of dirt is put on your box – you are allowed to show abit of initiative and work for and take care of yourself a wee bit

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  47. Reid (15,498 comments) says:

    I did blame neoliberalism in point of fact.

    Lee I know you’re sincere but to be honest mate I stopped reading when you used the word “neoliberalism.”

    As a conservative and I suspect I speak for many, I don’t know what it means. I’m aware lefties have started using it all over the place in an attempt to place a label, but I’m afraid mate Tavistock this time has got it wrong, for a change, in that if you can’t explain what it is in a sentence, you’ve lost the audience. I mean, I can explain who neoconservatives are in a sentence.

    Cunts.

    But you can’t do that with neoliberals can you. Hamnida has attempted to explain but to be honest I just can’t be arsed trying to understand the details.

    Does it mean Hayeckian, if so how?

    …point the finger at the speculators and parasites who have brought this disaster around our ears.

    Be specific. You should have picked up from my above I have some in mind myself, but who do you think is responsible? I mean for the international economy, that’s what this thread is on, not local, who cares about that?

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  48. Yoza (1,334 comments) says:

    Reid 7:03 pm:“But you can’t do that with neoliberals can you. Hamnida has attempted to explain but to be honest I just can’t be arsed trying to understand the details.”

    Neoliberalism is the attempt to undermine the democratic process through the transfer of publicly owned and managed assets and services to private corporate interests. Wikipedia goes into further detail

    Which brings us to wat dabney 4:24 pm: “Yoza, Milton Friedman explains how the left is the problem when it comes to special-interest groups plundering the rest of us.”

    This would be the same Milton Friedman who advised the fascist dictator Pinochet (A good friend of Maggie Thatcher, btw)- his letter to Pinochet is worth a look. I found this excerpt most worthy of understanding Friedman’s capacity for ignoring human suffering in an attempt to further his economic credentials: “May I first say how grateful My wife and I are for the warm hospitality that was showered on us by so many Chileans during our brief visit.( It is quite incredible the level servility the threat of torture or ‘disapearance’ can coerce.) We were made to feel very much at home.(?!) The Chileans we met were all aware of the serious problems your country faces;(Incredibly Friedman wasn’t talking about the death-squads, torture chambers or the murderous antics of the Chilean military.) all realized that the immediate future was going to be difficult;(most especially for those subject to torture, ‘disappearance’ and the murderous antics of the Chilean military) but all displayed a determination to surmount those difficulties and a dedication to work for a happier future.”(A happier future being the entrenchment of state sponsored terror)

    Pinochet, of course, followed the advice of Friedman and his ‘Chicago Boys’ which saw the experiment with a militarily enforced neoliberal (there’s that word again, Reid.) experiment;: ushering in the Chilean economic miracle

    “In 1973, the year General Pinochet brutally seized the government, Chile’s unemployment rate was 4.3%. In 1983, after ten years of free-market modernization, unemployment reached 22%. Real wages declined by 40% under military rule.

    In 1970, 20% of Chile’s population lived in poverty. By 1990, the year ‘President’ Pinochet left office, the number of destitute had doubled to 40%. Quite a miracle.

    Pinochet did not destroy Chile’s economy all alone. It took nine years of hard work by the most brilliant minds in world academia, a gaggle of Milton Friedman’s trainees, the Chicago Boys. Under the spell of their theories, the General abolished the minimum wage, outlawed trade union bargaining rights, privatized the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatized 212 state industries and 66 banks and ran a fiscal surplus.

    Freed of the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward – into bankruptcy and depression. After nine years of economics Chicago style, Chile’s industry keeled over and died. In 1982 and 1983, GDP dropped 19%. The free- market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor. Yet, with remarkable chutzpah, the mad scientists of Chicago declared success. In the US, President Ronald Reagan’s State Department issued a report concluding, ‘Chile is a casebook study in sound economic management.’ Milton Friedman himself coined the phrase, ‘The Miracle of Chile.’ Friedman’s sidekick, economist Art Laffer, preened that Pinochet’s Chile was, ‘a showcase of what supply-side economics can do.’”

    The spectacular failures of past experiments do not matter to the crazies promoting ‘free-market’ dogma, all that matters is the zealous adherence to the faith. Maybe you maniacs need to start burning anti-neoliberal heretics at the stake to elicit favour from the Gods of Quasi-Libertarianism.

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  49. Yoza (1,334 comments) says:

    The links didn’t seem to work:
    http://en.wikipedia.org/wiki/Neoliberalism

    http://wwww.naomiklein.org/files/resources/pdfs/friedman-pinochet-letters.pdf

    http://www.zcommunications.org/tinker-bell-pinochet-and-the-fairy-tale-miracle-of-chile-by-greg-palast

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  50. Tom Jackson (2,225 comments) says:

    Lee C

    You’re wasting your time with them.

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  51. OECD rank 22 kiwi (2,784 comments) says:

    NeutralObserver says on December 26th, 2012 at 9:48 am

    Where the hell are our decent entrepreneurs giving us a growing economy

    They’re in Switzerland. Merry Christmas.

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  52. Lee C (4,516 comments) says:

    Hi Reid (And thanks Tom)

    I can cite a number of things: Th rise of Deregulation:

    . Jimmy Carter’s Depository Institutions Deregulation and Monetary Control Act of 1980 phased out a number of restrictions on banks’ financial practices.
    0. Ronald Raegan In October 1982, Garn–St. Germain Depository Institutions Act, began the process of banking deregulation and contributed to the savings and loan crisis of the late 1980s/early 1990s.
    . President Bill Clinton signed into law the Gramm–Leach–Bliley Act, which reduced the separation between commercial banks (which traditionally had fiscally conservative policies) and investment banks.
    . In 2004, the U.S. Securities and Exchange Commission relaxed the net capital rule, fueling the growth in mortgage-backed securities supporting subprime mortgages.
    0. Financial institutions in the shadow banking system are not subject to the same regulation as depository banks, allowing them to assume additional debt obligations relative to their financial cushion or capital base.[96]
    Citigroup moved significant amounts of assets and liabilities off-balance sheet into structured investment vehicles, masking the weakness of the capital base of the firm or degree of leverage or risk taken. Such Off-balance sheet entities were also used by Enron as part of the scandal that brought down that company in 2001.[99]
    . As early as 1997, Federal Reserve Chairman Alan Greenspan fought to keep the derivatives market unregulated.[100] Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion.
    .
    0. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008.[102] Warren Buffett famously referred to derivatives as “financial weapons of mass destruction” in early 2003.[103][104]

    Finaialization

    The fragility of the banking expansion – a process called financialization. From the 1970s onward has emphasized deregulation which resulted in less oversight and disclosure of information in traditional and evolving financial institutions. ‘Ghost institutions’ also known as the shadow banking system evolved and Governments bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments.

    Fraud and Predatory Lending

    In testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III his testimony stated that by 2006, 60% of mortgages purchased by Citicorp from some 1,600 mortgage companies were “defective” (were not underwritten to policy, or did not contain all policy-required documents)
    In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton’s review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. 28% of the sampled loans did not meet the minimal standards of any issuer.

    Predatory lending enticed borrowers to enter into “unsafe” or “unsound” secured loans for inappropriate purposes, such as the bait-and-switch method used by Countrywide Financial, who advertised low interest rates for home refinancing. Such loans were written and swapped for more expensive loan products on the day of closing. The consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.
    When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared.

    Increased debt burden or over-leveraging

    Competition from the shadow banking system may have pressured more traditional institutions to lower their own underwriting standards and originate riskier loans.[8]
    In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a “run” on the entities in the “parallel” banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls.:
    In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion. The combined effect of these factors was a financial system vulnerable to self-reinforcing asset price and credit cycles.[30]
    Paul Krugman, laureate of the Nobel Prize in Economics, described the run on the shadow banking system as the “core of what happened” to cause the crisis. He referred to this lack of controls as “malign neglect” and argued that regulation should have been imposed on all banking-like activity.[96]

    Echoing the central thesis of James Burnham’s 1941 seminal book, The Managerial Revolution, Bolge cites particular issues, including:
    . that “Manager’s capitalism” has replaced “owner’s capitalism”, meaning management runs the firm for its benefit rather than for the shareholders, a variation on the principal–agent problem;
    . the burgeoning executive compensation;
    0. the management of earnings, mainly a focus on share price rather than the creation of genuine value; and
    0. the failure of gatekeepers, including auditors, boards of directors, Wall Street analysts, and career politicians.

    An analysis conducted by Mark Roeder, a former executive at the Swiss-based UBS Bank, suggested that large scale momentum, or The Big Mo “played a pivotal role” in the 2008–09 global financial crisis. Roeder suggested that “recent technological advances, such as computer-driven trading programs, together with the increasingly interconnected nature of markets, has magnified the momentum effect. This has made the financial sector inherently unstable.”

    But as significantly in the context of my views:

    Robert Reich has attributed the current economic downturn to the stagnation of wages in the United States, particularly those of the hourly workers who comprise 80% of the workforce. His claim is that this stagnation forced the population to borrow in order to meet the cost of living.

    All from: http://en.wikipedia.org/wiki/Financial_crisis_of_2007–2008

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  53. Scott1 (357 comments) says:

    Lee,
    You seem to think that if you make the financial regulations more robust you fix all the problems, but you can’t make up for mismanaging one aspect of the economy by just not mismanaging another side…

    ie no matter what you think the right policy is there will be a social welfare (or whatever) policy that someonepolicy makers could use to destroy your economy regardless of your banking regulations.

    the other issue is that in a way contries are forced to liberalize regulations. ie that it is not just a choice of government, such that if they were to just realize they could change their minds… Instead to do so would be to incur costs to fight a potentially loosing battle against a force driven by improving technology, globalization etc.

    The best way around that that i see is for the world to have harmonized rules and thus to a large extent harmonized government… but …. the governments of the world can’t agree their way out of a paper bag and as we see in europe – monetary harmonization implies political harmonization unless one wants… problems…

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