The British Prime Minister is one of the Stupidest People Alive

[cthulu2016]

Deficit reduction and growth are not alternatives. Delivering the first is vital in securing the second. If markets don’t believe you are serious about dealing with your debts, your interest rates rocket and your economy shrinks.

http://www.number10.gov.uk/news/pm-economy-speech/

This guy seems to actually believe this shit.

This is a very typical presentation of ideological bullshit. State a readily disprovable ideological fantasy followed immediately by a tautology. Then if anyone disagrees with you you can accuse them of disagreeing with the tautology, and being obviously crazy.

It is surely true that "If markets don’t believe you are serious about dealing with your debts, your interest rates rocket." But to a bond purchaser "being serious about dealing with your debts" simply means having the intention and means to pay your debts, as scheduled.

Deficit spending is not synonymous with having no intention of paying off your bonds.

US bond yields are, as I write this, the lowest they have ever been. Ever. E-V-E-R. And our deficit is about the largest it has ever been during the last century except during WWII.

For a nation offering zero fear of default (like the UK and US) the confidence factor is already essentially maxed out. Further reduction of interest rates can only come from decreased economic expectations.

So in a sense Cameron is right. If austerity wrecks your economy then it depresses interest rates. True. Bond buyers are betting against growth. Enter a depression and watch the magic of low interest rates... they will plummet.

Why doesn't Cameron just say what he really means...

Low interest rates are good for economic growth. Interest rates are never lower than during a depression. Thus a depression is good for economic growth. QED.

Stupid, stupid man.

[LeftishBrit]

1. You are unfortunately all too correct

Though some would say that there are at least two stupider ones: Chancellor of the Exchequer George Osborne, who makes the day to day decisions about running the economy and is an utter fool; and Deputy Prime Minister and LibDem Leader Nick Clegg, who might have made some difference, but instead has been abetting Cameron on most of the cuts, and destroying his own party into the bargain.

Then there are most of the other cabinet members.

Bunch of twits!

Ugh!

[cthulu2016]

2. Yes, George Osborne is an amazing idiot.

[Prophet 451]

11. I bitterly regret voting for Clegg

What this bunch of vandals are doing to our country terrifies me. Their demolition of the welfare state and the NHS seems designed to kill me personally.

[tabatha]

3. Funny how the right has gone from deficits-do-not-matter to deficits-worse-than-terrorism.

When, ironically, deficits were caused by fighting terrorism with an army instead of a special force.

[AnotherMcIntosh]

8. Absolutely

deficits that increase war profiteering and benefit the tax-avoiding super rich = good
deficits that benefit the working class = bad

[Odin2005]

4. Not stupid, this is boilerplate Neo-Liberal Corporatist ideology.

[ladjf]

5. Yes, they want "austerity" because it benefits their pocket books. nt

[mr blur]

6. Well, he's not the sharpest knife in the drawer,

I'd say he was working out pretty much as expected.

[Gregorian]

7. Holding office doesn't require intelligence nor honesty. See Bachmann, Palin, et cetera.

There is a guy running for the US House who I briefly shared a house with. His bio is far from honest. He's a doctor, and not ignorant. But it's the first time I've ever known one of the candidates for office. It really sank in. They're just human. And many of them subhuman.

[Mutiny In Heaven]

9. His job prior to politics was

that of a PR man for Carlton television. I said two years ago that he was the British George W. Bush; born into luxury, little between the ears, and - as usual - I was bang on the money.

The big difference is that unlike Bush, unlike his heroine Thatcher, there's not going to be a war to save his skin. His party are fourteen points behind in the polls at present, and although I still fear and expect to some extent that the British public are foolish enough to hand his Tories another five years, a Cameron concession speech would be an unforgettably wonderful thing.

[Prophet 451]

10. He's not stupid, he's evil

He knew full well that austerity would plunge the country back into recession but it gave him the excuse he needed to enact a massive dismantling of the welfare state and NHS, both of which the Tories are ideologically committed to destroying. Never forget, the goal of the monied class is to have a pool of people desperate enough that they will work for pennies. By systematically destroying the social safety net (which the Tories have always wanted to do), Cameron genuinely believes that people will be forced to take the minimum-wage jobs that magically appear.

Of course, it's possible that he's both evil and stupid.

[cthulu2016]

12. They often go hand in hand

[FunkyLeprechaun]

17. He will NOT dismantle the NHS

He used the NHS for his disabled son and continues to do so for his family.

[Prophet 451]

19. He's started handing it over to private companies already

The man is a sociopath, he doesn't have any gratitude.

[MichaelMcGuire]

20. To be fair, the internal market has been part of the English NHS for years.

Whether New Labour or Tory. Introduced by Tories and strengthen by Blair.

BTW I'm not in favour of increased private involvement. Tory or New Labour.

[Prophet 451]

26. True, but...

The market now includes companies like Virgin Care. See, for example: http://www.organizedrage.com/2012/04/richard-bransons-greed-helped-ruin.html

[MichaelMcGuire]

27. It's not for me to dictate NHS policy in England.

But the main three parties have pretty much accepted the creeping privatisation of the NHS in England. The disagreement between them is only to what extent. Contrast that to NHS Scotland where the Scottish Government (SNP) opposes privatisation of our Scottish NHS. The services between NHS England and NHS Scotland are generally comparable in quality and service. Which leads me to think that the drive is purely ideological.

[Prophet 451]

28. Of course it's ideological

It was never anything but ideological. The Tories are committed to destroying the social safety net entirely; the LibDems have abandoned any pretence of holding any power in the coalition in favour of just making up the numbers and Labour, which shifted strongly to the right under Blair hasn't finished it's trek back left under Milliband.

Look, you're not going to offend me by ragging on any of the three parties. I'm a social democrat so I'm to the left of all of them (especially with how far to the right Blair pushed Labour). I voted LibDem last time and have bitterly regretted it ever since (see upthread for why). These days, I support Labour simply because they're the least bad alternative.

[LeftishBrit]

33. He also went to university for free. That didn't stop him upping the fees.

Plenty of politiicans use services for themselves and their families while they're there, but may still be willing to weaken them.

In any case, the NHS policies seem to be mainly thought up and implemented by Lansley; but Cameron happily lets Lansley do as they please.

Actually I don't think that they will dismantle the NHS, because the public would never stand for it; but they are seriously weakening it.

[FunkyLeprechaun]

13. Why is this post being taken seriously?

You have Gordon Brown's office leaving a note for Cameron's office "Sorry, there's no money left.".

I really believe, as an American ex-pat living in the UK, in terms of domestic policy, Cameron is probably more to left of Obama on very liberal issues such as gay marriage (he actually backed gay marriage before Obama) and the NHS.

Seriously WHO do you think would be the best to run this country? Please enlighten me? I've looked at all three (Brown, Cameron, and Clegg) before voting on one of them. I had a really bad viewpoint on Brown's time as PM (he spent like a drunken sailor like Bush, even though HE was the previous chancellor of the exchequer). The longer I live here, the more and more I feel all THREE of the parties (Tories, Labour, and LibDems) are very very alike with very minor differences. For an american whose major voting issues are already resolved in this country, it's very difficult to make a choice. I somewhat disagree with Cameron on Austerity measures... I'm not exactly sure if they'll work.

Conservatives in Britain are probably the Democratic Party in the US. They're really extremely liberal in terms of American politics.

Labels can be silly things sometimes.

[cthulu2016]

14. Perhaps you're a conservative who favors marriage equality

There's no law against it.

There is no "gay marriage economics"... the fact that a nation may be socially liberal does not, unfortunately, mean that an aberrant economic theory in vogue there is likely to be correct.

This OP is being taken seriously because Cameron's view of economics is batshit crazy and utterly indefensible and supported by no known facts and destructive as can be.

And if all three parties are terrible that is scarcely an endorsement of any of them so why would that be an operative defense of Cameron?

Cameron's view of macroeconomics is equivalent to saying the sun orbits around the Earth. It is that wrong. At least there is some evidence of the sun going around the Earth insofar as it appears to do that.

The argument that austerity, in the conditions of 2012, increases GDP or employment or reduces rates except insofar as it suppresses economic growth does not even have the appearance of being correct. It flies in the face of all evidence regarding the behavior of economies in the conditions we find in 2012.

[FunkyLeprechaun]

16. I'm actually not a conservative

I'm a longtime Democratic voter who moved to the UK in 2006. Every single time someone asks me my politics I say I'm an American Democratic Party voter.

I'm still on the fence about austerity. I feel that we need to spend more for domestic policies but at the same time Bush spent a lot for nothing.

[Mutiny In Heaven]

15. Cameron's cuts have hurt

the vulnerable the most. They have prioritised assisting and enabling the wealthy with massive, disprortionate tax cuts while intentionally doing all they can to shift the blame for the crisis on to "welfare". David Cameron can easily afford to back gay marriage because he's never going to get elected if he doesn't have as wide a coalition as he can, Britain simply isn't as socially backwards as the United States, but that's more of an indictment on the US and how far-right nutfucks have driven it for the majority of the last fifty years than it is a credit to socially liberal European countries.

See the fudging of statistics (pensions are included in the cost of "welfare" to society) designed to fuel support for their 'war on benefits'.

See the flagrant abuse of pensions which have those noted militants, TEACHERS to strike.

See their removal of working tax credits from families which work less than 24 hours per week (because it's SO EASY to find a job in the current environment).

See the faux shock George Osborne displays, who he CANNOT BELIEVE that some rich people avoid tax (but ya CAN believe that all of those welfare fuckers are cheating the system, can't you, George! Bastards! Not born (inbred) into the right stock, George! A little bit too much diversity in THEIR gene pool, the fuckers!).

See the removal of most legal aid, making something as routine as legal advice a horrible struggle to afford for poorer partners.

See the attempts to cajole the long-term sick back into work, something which, of course, disproportionately affects those with mental health issues.

See the NHS 'reform'. That is fucking terrifying.

See the 5% tax cut for people earning over £150,000 in a shattered economy, while this is going on. Shameful.

And so on and so forth.

The fact that Obama tried to avoid austerity is the only reason the US economy isn't as fucked up as Britain's. Of course, the GOP have managed to reverse the course somewhat, but the fact that it hasn't been balls to the wall austerity is the only reason it hasn't collapsed.

Labour, like the Democrats from the 70s to 2000s, made plenty of mistakes, but fucked up as they can be, it's nothing compared to the abject misery one feels under a Tory government if not protected by a bubble of wealth. Fuck them. As for the Liberal Democrats, if having a somewhat competitive third party does this, I'm delighted that there won't be another one for decades.

[FunkyLeprechaun]

18. Cameron's cuts have hurt EVERYONE

And I'm an unemployed disabled jobseeker btw. I have to say that Cameron is NOT a far-right nutfuck. For god's sake, we have the BNP and the UKIP who are fucking morons.

Okay, I understand your criticism of George Osborne (I've tried my best to track Osborne in the news but I've been busy) but what do you think of Gordon Brown, the former chancellor of exchequer turned PM? He left a note for Cameron "Sorry, no money left!"

What would you think of that?

[cthulu2016]

22. I apologize. I shouldn't have been political earlier

I should have kept it to economics.

When one said, "There's no money left," that was not a meaningful statement. With the global economic slowdown the costs to the UK of borrowing were certain to only go lower and normal economics demanded, like flat out demanded increased deficit spending.

Not just increased spending, but increased deficit spending in particular. Net borrowing is down throughout the world, including in the UK. Borrowing is a major part of economic growth, including employment and wage growth. The government becomes the borrower of last resort.

The demand for credit in the UK affects interest rates. That demand is both government and private borrowing combined. If the private sector borrows 100 less and the government steps in to borrow 90 more, to stimulate the economy, or depress the economy less, the total demand for credit is still down 10.

But the increase of 90 in government borrowing will be said to be likely to drive up interest rates. When someone says that they are either very dense or they are politically or ideologically motivated to want to reduce government spending categorically, and are offering a plainly false argument toward that end.

Only right wing *economic* crack-pots failed to understand that interest rates would not and could not go up in the wake of this mess we are in unless 1) there was an imaginable default risk, or 2) the economy showed real (durable) signs of recovering.

Most right wing European politicians are to the left of American Democrats in some ways. But one can be moderate in ways while still being an economic crackpot. Jack Kemp was moderate on some things but an ardent believer that we need to return to the gold standard.

The US and UK and Japan (with a much larger debt than we have, I think) are not default risks. And net borrowing would still be down in those economies even if the government deficit was much larger. And if a government is preaching austerity the bond traders know there won't be any economic growth to worry about.

So of course interest rates will be low, whether the government tries austerity or stimulus. There is a real chance that interest rates will rise if there is enough stimulus, but that rise is not caused by the borrowing demands of the government, it is caused by the apprehension that the economy will recover as a result, making a 2% return on a bond a much less attractive proposition.

Cameron is depressing GDP in his nation in order to keep interest rates low because low rates lead to higher GDP. It is demented. It really is like saying the sun goes around the Earth.

There were economists who said, "Double the deficit and interest rates won't budge a bit." They were correct, but ignored. The higher interest rates were assumed by these weird right wing types to be in the offing even though they were nowhere to be found, and fought against despite their not existing (!)

Whatever pain you are experiencing from austerity is not only unnecessary, it is counter-productive.

[Prophet 451]

23. That's a myth

The note was actually from the chief secretary of the treasury to his successor. The plain facts are that Cameron's cuts HAVE been targetted at the disabled and vulnerable (see for example, the change from DLA to PIP which is expected to kick an arbitrary 20% off the rolls through the harshest disability test in the world although I could do a whole post just on how those cuts have been targeted at the most vulnerable). Labour did not spend like drunken sailors. Our economy got battered for exactly the same reasons the USA's did. And austerity has never worked anywhere it has been tried because it is exactly backwards from how the real world works.

You are spreading a bunch of Daily Mail style falsehoods. I'm going to be charitable and assume that's because you don't understand our politics fully yet.

[LeftishBrit]

34. Gordon Brown did NOT leave that note

It was Liam Byrne to David Laws. He was being flippant, but in any case he was a disgusting person to do this, because he could have known that the Tories would use it as ammo. But I despise Byrne in any case. All Tory politicians are bad (yes, not as bad as the BNP or UKIP, but that's not a big recommendation for them); but not all Labour politicians are good.

There is indeed a global economic crisis, and there would have been some cuts whatever government was in power; but the Right here have worsened the damage by emphasizing only deficit reduction and ignoring the need for growth; and by their dislike of public services as such. The point is that many of them are strong ideological supporters of cuts and privatization and reduction of public services and 'smaller government' for their own sake. Thatcher et al pursued policies of cuts and privatization and favouring the financial sector at times when there was no economic crisis.

I am not sure whether Cameron himself is a far-right nutfuck, or whether he just wants to be Prime Minister and strut around and look important and therefore he panders to far-right nutfucks. I suspect it's the latter. But it comes to the same thing in terms of policies.

[Prophet 451]

24. "disproportionately affects those with mental health issues"

I'm one of them. I am mentally ill and I live in sheer terror of the regular assessments by ATOS because firstly, we now have the harshest disability test in the world and secondly, ATOS are incentivised to declare as many people fit for work as possible. There are numerous accounts of them doing things like firing someone for being too ill to work and then turning around and assessing the same person as fit to work. The tests have become so harsh now that Stephen Hawking would probably have problems passing them. And next year, Disability Living Allowance (which used to have a vaguely sensible test) is going to be turned into PIP and handed over to the same bunch of savages so an arbitrary 20% can be cut off the rolls. Suicides because of those bastard tests are not uncommon.

I am very much aware of how precarious my position is. I struggle with suicidal thoughts daily and the outright hate campaign against welfare claimants here has gotten so bad that I have had to start actively avoiding news from my own country because it's liable to set off another bout of cutting.

[LeftishBrit]

35. I agree that all our political party leaders are relatively liberal on social issues

And that's a good thing, when I compare them with the likes of Palin and Santorum in America; not to mention people like Nadine Dorries here. But there are big differences in economic issues. And in the end if a politician regards poor people as feckless people who need 'tough love' to force them to overcome their 'benefit dependency', then they are NOT really socially liberal. I have always thought that the recent tendency to separate social and economic progressivism is misguided, as you cannot really have either for all without the other; and it is especially misguided in a country like the UK with a traditional social class system.

I thought Brown was as good a Prime Minister as anyone we've had recently; and he did not 'spend like a drunken sailor'; that is propaganda from those who dislike the public sector as such. Blair did overspend on wars, projects like the Millennium Dome, and constant reorganizations of everything (though that is not the cause of the economic crisis, which is a global issue); but Brown really did work to improve health and education in this country. He was not perfect, far from it- I think our last good Prime Minister was Harold Wilson, and Callaghan was better than anyone who came after -but he was infinitely better than Cameron.

There have been times when there wasn't much of a difference between the parties, and certainly I consider Blair to have been a Tory; but I think there is a pretty huge difference in the fundamentals right now. The basic issue is: do you deal with the economic crisis mainly by using the government to combat it - through job creation, and through protecting the most vulnerable people; or do you deal with it predominantly by seeing government as the problem, and by cutting public services which inevitably leads at a time of recession to greater unemployment, and means that the most vulnerable suffer the most as they are the ones who are generally most dependent on public services?

[sabrina 1]

21. I think that is the general consensus about Cameron. He is merely a tool who does what

he is told. With the failure of the system he is still supporting all around him, throughout the globe, he merely reads the memos they hand him.

[Prometheus Bound]

25. I question some of your assumptions

1. For a nation offering zero fear of default (like the UK and US)
I would say their chance of default is a lot higher than zero.

2. Deficit spending is not synonymous with having no intention of paying off your bonds.
In some cases it is. Holders of Greek bonds didn't fare that well.

3. US lowest bond yields with highest deficits
I don't think we can assume this is sustainable. Look at yields on Italian (5.5%), Spanish (6.35%) and Portugese (13%) bonds.

[cthulu2016]

29. Probably disorganized, but i'll try

1. For a nation offering zero fear of default (like the UK and US)
I would say their chance of default is a lot higher than zero.

The literal default risk in both cases is effectively zero because both have sovereign currencies. So the question becomes the devaluation risk.

But in general, whatever the real likelihood of a US or UK bond holder not getting paid back is priced at close to zero. Both nations have 10-years paying under 2%.

Most of all, though, I was just trying to efficiently distance the US and UK (in my explanation) from Greece or Italy which do have substantial risk premiums that change day-to-day. (But even then largely because they have no control over the currency their debt is denominated in.)

However close to zero, the risk premium in our treasuries is the lowest such premium in the world.


2. Deficit spending is not synonymous with having no intention of paying off your bonds.
In some cases it is. Holders of Greek bonds didn't fare that well.

Greek debt is denominated in Euros. Greece cannot control the Euro supply. So Greece really can be forced into default. But the problem there isn't deficit spending per se. It is the lack of options.

We have huge deficits. Japan has ginormous deficits. We both have very cheap credit. There is no basis to think that UK austerity has reduced interest rates other than by reducing growth expectations.



3. US lowest bond yields with highest deficits
I don't think we can assume this is sustainable. Look at yields on Italian (5.5%), Spanish (6.35%) and Portugese (13%) bonds.

This is sustainable in the US until there is a robust, sustainable recovery. At that point it becomes unsustainable. Deficit spending isn't a tool for all environments. It is essential in a down economy and irresponsible in an up economy.

The European yields you cite have immense risk built into them, and they should. Those nations do not control the currency their debt is denominated in. Default is always a possibility because they cannot, as a last resort, print money to pay their debts. (That is a substantial reduction of risk because it means that if worst comes to worst you still won't end up with zero.

Meanwhile Japan has a worse debt picture than, say, France but doesn't have high rates because Japan will never default. At worst it will give you devalued Yen.

And the European risk is circular. If a nation's debt picture means they will be thrown out of the Euro then their ability to come up with x number of Euros is even more in doubt, and so on.

If Cameron was the head of France his comments would be bad policy, but perhaps not totally delusional.



Bottom Line: The claim that austerity increases GDP is of the same school as the Reaganomics claim that cutting taxes increases revenue. It is counter intuitive for a reason.

______________________________________


right after typing this, I read this Paul Krugman post from on online appearance at FDL, and thought it germane to throw in:


For those not clued in, all of the debt crisis countries right now are either countries that gave up their own currencies for the euro, or borrowed heavily in someone else’s currency (Hungary). Countries that issue their own currency and borrow in it, like us, the British, and the Japanese are able to borrow at very low rates even when, like Japan, they have high debt levels.

So can they (and we) ever have a debt crisis? I think so, but it takes much higher levels of debt than even the Japanese have. People have to believe that there’s no way they can service the debt without printing lots of money, even once the economy has recovered.

The closest parallel I’ve been able to come up with (too deep in the weeds, but I can’t help myself) is France after World War I, which had its own currency but a basically impossible level of debt. Even so, the consequences weren’t catastrophic: a sharp drop in the franc, a brief bout of inflation that reduced the real value of the debt, and a return to stability.

The important point for now is that America is nothing, nothing like Greece — that is, unless the austerians push us into a full-on depression out of misplaced fear that we’re going to turn into Greece …

http://fdlbooksalon.com/2012/05/19/fdl-book-salon-welcomes-paul-krugman-end-this-depression-now/#comment-2219961

[Prometheus Bound]

30. Thanks for the very thorough reply.

quite interesting

[Cali_Democrat]

31. So deficit reduction produces confidence? It's important that markets are confident?

[cthulu2016]

32. URRK!