Martin Wolf argues in the FT this morning that:
Guarded optimism about the immediate future for the world economy is reasonable
He extrapolates that the UK is not facing major risk as a result.
I would love to agree with him.
Nothing I see lets me do so.
Maybe he does not see low wages, too high house prices, asset bubbles bursting, increasing consumer debt, austerity, a lack of investment, a savings glut, a crisis in pension funding fuelled by stock market falls, increasing trade deficits, declining growth and a government committed to removing trade union rights that are essential to the the rebalancing of reward in the economy as issues of concern.
I do.
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Martin Wolf is right, inasmuch as there is no risk for the people he serves.
In many ways – perhaps too many – Wolf is correct.
But as you allude, his viewpoint is narrow and obviously from that of the part of the economy that supports the rentier class because if something goes wrong they will either benefit from the chaos or Governments will seek to create liquidity for the assets of the rich as they have done in the past.
In other words, Wolf knows what Governments and the Banks know – that Governments will soon have to bail out the banks/financial system yet AGAIN.
Only the rich deserve social security because they work so hard of course to accrue wealth!!
And sod everyone else.
It is our worst nightmare – business as usual.
I don’t see why there are worries about low oil prices, which I would have thought should boost the economy. In the 70s high oil prices caused an economic crisis.
And the “living wage” NMW increase in April could be a sizable boost for the economy (providing it does more than just replace benefits and tax credits.) Although it will trigger a massive emergency in social care.
In principle oil price falls are good
It’s the reaction of the states that produce oil that matters
We are an open economy
There are some dangerous assumptions in your brief comments there Richard which would of course depend on your perspectives!
Oil price falls can only really be good if burning more oil is good. True it is financially easier for consumers in the short term if oil prices (or more specifically pump prices which is another matter) are lower, but in the long term this can hardly be considered good for any of us.
Should we encourage cheap coal prices, cheaper diesel engine technology, cheaper cigarettes and alcohol for example – because it is good for consumers in the short term?
The oil price battle is nothing to do with economics, it is a power battle within and between the Middle East and the rest of the world. The consequences of this will be far greater to the worlds population than the price at the pump in my very concerned opinion.
As for a open economy – yes but only when and where it suits our vested interests!
You are right
Cheap energy is not really in our best interests – alternatives are not developed, for example
Given that total national – indeed global – debt [state and private] is the albatross that’s bringing down our current monetary/financial/banking system it makes sense to address the source of that problem. There only is one realistic solution and that is to [a] progressively remove it and [b] prevent its subsequent rebound. At the same time the problem of excessive inequality can also be addressed.Some inequality is essential to drive ambition and aspiration but too much causes stagnation which is where we are now.
It is the duty and responsibility of any sovereign state to provide its economy with an adequate debt/interest free money supply appropriate to the size and activity incumbent in that economy. So..
1. Progressively monetise all current government debt [incl. PFI]
2. Fund all new infrastructure projects with new money
3. To prevent an excess of money arising hike commercial bank capital reserves to 30%
4. Introduce a citizens income system, scaling back benefits
5. Abolish income Tax – it’s only existed for c. 100 years!
6. Abolish Corporation Tax and Inheritance Tax
7. Introduce a flat rate tax on ALL transactions – i.e. including wages, salaries and bonuses. 3% – 5%/ should be enough [Richard?]
Sorry, you are assuming state and private debt are synonymous
They are not
We need state debt
And the idea of a flat tax on all transactions is so unjust it is beyond the boundaries of any credible solution to any problem
Surely levels of private debt are due to imbalance in the consumer economy?
Why do we need state debt ? – or are you referring to double entry money creation?
If you refer to the need for a savings medium why does this have to be treasuries?
Re “flat rate tax” OK perhaps I should have said “low rate” – the important bit being that it is paid where the transaction occurs and not at the rate prevalent in the Cayman islands.
The other proposal that I omitted above was :
8. Abolition of tax relief on interest payments.
Sorry Peter
That still does not stack
Low is still unfair
And why is private debt all bad? How are people to buy houses, for heaven’s sake?
And why do we need state debt – because it is the depositor of last resort, that’s why
Richard I’m still not convinced why a all-embracing low rate of tax across all transactions – albeit not necessarily a flat rate – would be unjust when my proposal included [a] citizen’s basic income [b] abolition of income tax [a very recent introduction of the last century!] [c] abolition of corporation tax and inheritance tax [d] abolition of tax relief on interest payments.
I feel sure there is a rate [are rates] that would enable this to stack up.
you’re the expect! Please explain why it wouldn’t and how it would be unjust.
It would certainly favour savers and hammer avoiders/evaders.
I eagerly await your reply!
Please read The Joy of Tax
I gave up on Wolf when I heard him say, at the Lords Inquiry into Housing, that buy-to-let is a good way for pensioners to secure their future income. Someone that immoral has no place in the economics debate IMO.
I met Wolf late last year
He admitted he read my stuff
The tone without enthusiasm
I liked this letter in today’s Independent:
The job growth that David Cameron claims has occurred under his stewardship always takes place in non-tradable domestic services, that is, in areas that do not produce exports and have no competition from imports. This is the job profile of a Third World country.
If we look at the jobs that the Tories claim to have created, almost all are in poorly paid domestic services: waitresses, bartenders, couriers and messengers, employment services and social services.
And yet this non-economy on the verge of collapse is said by the idiots in Westminster to be in recovery.
Alan Hinnrichs
Dundee
He could have added:
1. precarious to boot
2. Zero hours contracts
3. Spuriously ‘self-employed’ after benefit sanctioning
presumably by ‘social services’ he’s referring to private care homes and the like-given that local authority social services have been shrinking disastrously in many areas (including Cameron’s own constituency county-a fact to which Cameron was oblivious http://www.theguardian.com/commentisfree/2015/nov/11/david-cameron-letter-cuts-oxfordshire.
I assume Wolf has succumbed to the bubble world of academia and journalism where you are largely mixing with the relatively affluent and secure. A common phenomenon amongst many who have found a secure position with cosy lecture invites.
Government and private debt are indeed inter-related in that private debt [other an mortgage principals] results from a failure to balance ones budget whilst at the same time the government budget determines levels of taxation which clearly impinge on private budgets.
We are currently in a situation where people cannot afford to buy houses – either income is too low to even service a mortgage – or house prices are too high – but that implies builders wages are too high!
Perhaps 3-D printing of rabbit hutches – sorry houses – will solve all that.
Either way the system is out of kilter and as we both agree is unsustainable.We have to arrive at an equitable tax system that is unavoidable – are Canada not considering a low rate transaction tax..?
I appreciate the rate would have to be minimal for capital goods or savings mediums eg stocks and shares.
Totally wrong, Peter. It’s the land value which is too high. New houses can be built for less than £100k. Most second-hand houses are worth less than £50k.
“but that implies builders wages are too high!”
I suspect the late motor vehicle manufacturer Henry Ford, amongst a posse of others, would be rolling on the carpet heaving with laughter and slapping his thighs at that one.
If builders wages were too high than a whole chain of others working in a range of sectors where the builders in question spend their earnings would also be coining it in. As Ford noted, paying his workers high wages meant that not only could they afford his cars but those they spent their wages on could also have the wherewithal to do so, recognising that an efficient and effective economy requires money to circulate widely and often rather than accumulate in the corner for the benefit of a tiny minority.
Back here in the real world the problem is not high wages but high profits relative to low wage rates and over valuation in housing as a result of a housing debt bubble which, amongst the general debt bubble (not just consumer debt but also company debt, student and educational debt, leveraged, hedge fund and derivative debt) is hiding the mis distribution of money and resources. The forty year reliance on debt substituting for realistic wage levels is no longer sustainable. Trying to blame this on high wages rates,even for one sector, flies in the face of the obtainable and observable facts.
0/10. See me after class.
There need not be failure in here
All your language is wrong
And taxation and spending are independent, at least to some degree
To Dave Hansell:
What I said was that house prices being too high IMPLIES builders wages are too high – in that more people would choose to self build which they are not doing because of the cost of building. The result is that old houses are achieving values akin to newbuilds. The problem is the shortage of housing and lack of funds/wages/salaries. In the South East [aka London area!] it is reported elsewhere on twitter than over 60% of income is being spent on renting accommodation. What hope is there of ever buying under those circumstances.
I can’t say that I always agree with Steve Hilton’s thinking, but it is interesting the direction he is traveling at the moment. Seems like a few years in California is getting his brain cells more “radical”.
Quite what he means by “radical democratisation” is unclear, but it is a concept that some in the left and right might be able to converge on if proposing “economic democracy” is what he is suggesting.
http://www.theguardian.com/commentisfree/2016/jan/23/davos-plutocracts-politicians-deserve-contempt