[IanP]

It's true that the previous UK government dicked about with inflation measures and targets (arguably to hinder the Bank of England from stopping the housing boom before the 2005 election) however you're wrong on food and energy within CPI. See, for example, page 5 in here.

While its true that cpi doesn't include the housing costs this isn't the main reason for the difference between cpi and rpi which is caused by the fact that cpi uses the geometric mean while rpi uses the arithmetic mean.  One argument for the geometric mean is that it better reflects consumer behavior when prices increase (replacing expensive items with cheaper) and it is used in most developed countries as the prefered way measure inflation.  A quick search on the internet will show that this is not without controversy.

Strangely this detail is never mentioned when cpi / rpi is discussed on the news 

[philo]

also, going back to GDP and CPI's.  I wouldn't trust the governments figures .... the CPI does not include food or energy, or any commodity that would show the real inflation.

It's true that the previous UK government dicked about with inflation measures and targets (arguably to hinder the Bank of England from stopping the housing boom before the 2005 election) however you're wrong on food and energy within CPI. See, for example, page 5 in here.

Doesn't matter who is in power, the government will always cook the books.

If brown knew anything about economics he wouldn't have sold 200 billion £ worth of gold when it was £200 an ounce, AND announce when he was going to do it. (its now closer to £1500.)  We would be better off without a central bank artificially lowering interest rates and causing the mal investments that lead to the bubble economy we still live in. 

We actually need to reward savings and investment in our currency, the only way out of this is to manufacture and export our way out of it, and to stop printing money to pay for the spending.  If standards of living have to drop, then so be it.  If wages have to drop, then so be it.  If we stopped over regulating and making it so expensive to employ people then we might have a chance. 
If we cut spending, we could eventually cut taxes bringing trade back.    We are a long long way from doing what is right, we have to suffer another big correction before the politicians actually do what is right.  The next recession should be embraced because it means we might actually change our philosophy of economics and the role of government.

Look at the morons at the BOE today, more QE?  Whilst that is good for me as gold and silver will rocket in price, its bad for the country as our currency will be attacked again.  Unlucky if you have savings or bonds

http://www.guardian.co.uk/business/2011/dec/21/bank-of-england-more-quantitative-easing

[Oldmanmatt]

Philo, read some Galbraith. I don't agree with everything, but his policies worked and lead to a period of stability and growth for the US, unmatched before or since.
Surprisingly left leaning in its central control and a disdain for monetary policy, as well as fairly politically neutral.

[Oldmanmatt]

Oh yes, and too strong a currency is detrimental to exports...
Most manufacturers have been praying for the Euro/Sterling to weaken.

[philo]

Its not just our central bank that is creating inflation, look at how china had to do QE to stop its currency from rising.  Sooner or later they will realise that they will never get their trillions back.  When china allows its currency to rise, then the 1 billion people can actually afford some of the goods they export. they can consume them for themselves. 
Look we have a massive trade deficit with debt fuelled spending economy, we simply cannot go on with this.  If we continue to debase our currency then we will never get out of this economic problem.
The debt is the problem and low interest rates allow people to borrow and spend more adding to the problem.  Interest rates have to rise, if the free market did it then we would recover much quicker but like I said before, we had a choice before to let free market capitalism work freely without intervention and adjust interest rates accordingly, but soon we wont have that choice.  Is it so hard to think interest rates could be 10%?  what about 20%? 

[philo]

By the way, that Author you told me to read served under Roosevelt who made the severe recession a depression by government intervention. 
The stimulus did not end the depression, it prolonged the recession, just like the situation we are now in.  Obama is the Roosevelt of our time. 
So what got us out of a depression? After the war, Capitalism did.  If the government stays out, we would never have the bubbles that are the cause.  Go read some Austrian Economics 

[Stubbs]

What do you suggest we manufacture and export Philo?  Do you really believe we can compete with the East in any manufacturing? That wages could be dropped to levels and raw materials imported at rates that would make the UK competitive?

[philo]

we are taxed too much and regulated too much.  Look at the average age of farmers,  Japan, 65, USA 55 same with the UK  (data from the last few years)
We make cars, but instead of selling them to the UK USA or EU that cant afford to buy cars, remember we have bought too many cars.  We can export them to the developing nations.

If you look back to the industrial revolution in the USA, Ford paid the most to its workers and sold the cars cheaper than anyone else.  Its not until government get involved and bring in regulations and taxes that problems start.

Everything the government gets involved in, the price goes up.
Education, Health, transport, oil prices, now banking....

Compare it to parts of the economy that actually operate under free market conditions.  The price of mobile phones, does that go up each year?  Laptops is another example,  supply and demand.  Imagine the cost of mobile phones if in the mid 90s or early 2000s if the government said "ok everyone needs a mobile phone, we will make it the law".....

Our standard of living HAS to go down, we have priced ourselves out of the market and the government subsidising the losses and propping things up only adds fuel to the fire.

The UK is finished, we have no real wealth anymore.  North sea oil wont keep us up forever, we need to look at the kind of manufacturing jobs that made great britian great in the first place.  As i said above, we wont be making things to consume, we cant afford to consume the products any more.   Agriculture is another area that will boom when the next economic downturn comes

[Stubbs]

Your technological examples are flawed due to improvements in technology makig these products cheaper to manufacture each year.  Do the costs of these products go up each year in real terms vs. manufacturing costs? I'd hazard a guess at yes.

When was Britain great? What particular period are you talking about? The industrial revolution when the UK had an empire to draw resources from and a downtrodden working class to work in t'mills and t'pits?

[slackline]

I'm not overly familiar with what your talking about philo, but you're wrong to think that the cost of "Health" is higher with governmental involvement than private/free market.

Taking the US as prima facie for free market healthcare the cost per capita is highest, yet life expectancies are lower compared to other countries where the overall cost is lower and a greater burden of the expense is covered by the government.  See here for an overview, there are quite a few books/scholary articles out there on this with greater detail.

Of course the US system is massively inflated with unnecessary tests and drugs being prescribed, but thats a direct consequence of the free market in the area as "insurance companies will pay so lets do all the tests/drugs we can".

How are you quantifying "standard of living" is it life expectancy, median wealth, proportion of population with computers/tv, proportion of population living below a perceived poverty line, or perhaps what is in my opinion the most important thing which is each individuals perceived quality of life.

The UK has one brilliant asset it can exploit, its excellent academic/scientific/research output which is indeed world class and disproportional  to its size/population.  The translation of this primary research into day-to-day useable 'things' (purposefully vague as there is such a wide area) is the countries greatest potential 'export' (again purposefully vague, its also possible to 'export' the educational system that underpins this by offering training to overseas students/researchers).

[Jaspersharpe]

Some unrelated points. I deal with quite a few small manufacturing companies which are doing really well, particualrly in the special steels industry which despite reports still exists in Sheffield. I find it quite irritating when people who don't see stuff first hand go on about the UK being "finished" and there being no industry left. It's simply not true.

Germany has higher taxes and more bureaucracy than the UK (I deal with clients there) and yet their manufacturing industry is thriving and driving the economy forward through the small and medium size firms whcih are run sensibly for long term stability rather than short term profit. This is because they are mostly "family owned" so their survival doesn't depend on what their share price does from one week to the next.

This idea that the untethered free market can solve all ills is total bollocks of the highest order I'm afraid.

[philo]

Yeah but look at how Medicare and Medicaid are government entities and because you have government guaranteed healthcare in the US it drives the prices up.  Obamacare is even worse. 
Im not involved in the health service and have not looked into it in detail, but the principle of free healthcare and the "right" to a service is wrong.  We simply cannot afford it any longer.  We are broke.  You could argue that we could cut on defence spending and the pointless wars in Iraq/Afghan and the next one that looks to be either Pakistan or Iran, and put that money aside for healthcare then it might be more reasonable. 

The politicians aren't even subject to the public health service, same with their pension schemes too.
Which makes me think, the politicians and the BOE/ECB/IMF/FED any politician are not smart enough to "fix" the economy.  If George Osborne was so successful at managing businesses in the private sector he would be a billionaire.  We need to listen to people who are actually right about what has happened and look at how we can restructure and live within our means.

Socialism is a nice idea but it doesn't work.  Yes drug and insurance companies lobby to get the special benefits but its the direct involvement that pushes costs up. 

Look at education, if the government didn't back all of the student loans, would private lenders allow students to rack up 20k of debt at 0.5% interest doing a pointless degree for a job that doesn't exist?
If there were no student loans then uni's would be forced to cut the prices of education as people would not be able to pay it and the competition would drive prices down.


The technology example: of course the cost goes up in comparison to the manufacturing costs but it depends what you buy and produce it in.  The products get cheaper because capitalism is allowed to work.  Supply and demand, if someone wants a product or service then investments will go into that sector from private funding.  Its the goal to be profitable that drives the market. 

Remember, governments cannot create jobs or wealth, they can only take it from the private sector through taxes and inflate the currency through the bank of England QE. 
The government can only create work, not productivity.  Look at the soviet system, everyone had a job but they couldn't buy anything with their wages and that is the direction we are heading.


You should all watch this:

[philo]

Some unrelated points. I deal with quite a few small manufacturing companies which are doing really well, particualrly in the special steels industry which despite reports still exists in Sheffield. I find it quite irritating when people who don't see stuff first hand go on about the UK being "finished" and there being no industry left. It's simply not true.

Germany has higher taxes and more bureaucracy than the UK (I deal with clients there) and yet their manufacturing industry is thriving and driving the economy forward through the small and medium size firms whcih are run sensibly for long term stability rather than short term profit. This is because they are mostly "family owned" so their survival doesn't depend on what their share price does from one week to the next.

This idea that the untethered free market can solve all ills is total bollocks of the highest order I'm afraid.

ask them how much government regulations and the taxation scheme has hindered their growth.  I agree that we do have SOME manufacturing, but when we have massive trade deficits then you must surely see that its unsustainable?   How can we grow when we consume more than we produce. 

EDIT:  or do they get any govt subsidies?

[Jaspersharpe]

I'm their accountant so I already know how taxation and most regulations affect them as it's my job to make sure it's as little as possible. I can honestly say that taxation has had zero effect on growth in any succesful business I've seen. If it's handled correctly then it shouldn't (and I don't mean not paying any).

What hinders the growth of most SMEs is not excessive taxation or "red tape", it's banks being fucking cunts about lending to perfectly viable businesses.

No, none receive any subsidies.

[Stubbs]

Philo are you saying people shouldn't have the right to healthcare?  really?

[philo]

What hinders the growth of most SMEs is not excessive taxation or "red tape", it's banks being fucking cunts about lending to perfectly viable businesses.

No, none receive any subsidies.

fair enough, but again i think it is because the bailouts and free money given out by the bank of England with interest rates so low.  Why would you lend to someone with risk when you can lend to the government.  When interest rates rise all of the banks will fail again.

Stubbs:
Technically yes we have no RIGHT to someone else's service.  You have a right to liberty and freedom and your life but that's about it.  That's all the government should do, protect your liberty and freedom. 
If we had competition in healthcare then the price would go down, eventually it will all collapse anyway so whether we have a right to healthcare or not does not matter because it will also go bankrupt.  Its a nice idea but eventually we will run out of money to keep it running.

Let me ask, do you lot seriously think we have "recovered" economically?

[Fultonius]

From what I've read, the US model for healthcare is hideously expensive, not very effective (with reference to health indicators) and really only benefits the healthcare providers...

The NHS has its issues, but I think the fact it costs a fraction of the cost of the US schemes and gets better results has got to be seen as a positive, irrespective of your political leaning (free market/vs government provided).

My opinion (not hugely well informed) is that Singapore has a fantastic health care model that is efficient, cheap and equitable. Source:  http://econlog.econlib.org/archives/2008/01/singapores_heal.html

The key points are:

• There are mandatory health savings accounts: “Individuals pre-save for medical expenses through mandatory deductions from their paychecks and employer contributions… Only approved categories of medical treatment can be paid for by deducting one’s Medisave account, for oneself, grandparents, parents, spouse or children: consultations with private practitioners for minor ailments must be paid from out-of-pocket cash…”
•     “The private healthcare system competes with the public healthcare, which helps contain prices in both directions. Private medical insurance is also available.”
•   Private healthcare providers are required to publish price lists to encourage comparison shopping.
•   The government pays for “basic healthcare services… subject to tight expenditure control.” Bottom line: The government pays 80% of “basic public healthcare services.”
•     Government plays a big role with contagious disease, and adds some paternalism on top: “Preventing diseases such as HIV/AIDS, malaria, and tobacco-related illnesses by ensuring good health conditions takes a high priority.”
• The government provides optional low-cost catastrophic health insurance, plus a safety net “subject to stringent means-testing.”
•   Almost all care is subject to significant co-pays.

The Singapore government spent only 1.3 percent of GDP on healthcare in 2002, whereas the combined public and private expenditure on healthcare amounted to a low 4.3 percent of GDP. By contrast, the United States spent 14.6 percent of its GDP on healthcare that year, up from 7 percent in 1970... Yet, indicators such as infant mortality rates or years of average healthy life expectancy are slightly more favourable in Singapore than in the United States... It is true that such indicators are also related to the overall living environment and not only to healthcare spending. Nonetheless, international experts rank Singapore's healthcare system among the most successful in the world in terms of cost-effectiveness and community health results.

Let me ask, do you lot seriously think we have "recovered" economically?

Well, I guess in a roundabout way that was part of what this whole question was about - in the West, what will "recovery" look like, will we ever return to "growth" and, most importantly, is GDP growth even desirable?

[slackline]

Yeah but look at how Medicare and Medicaid are government entities and because you have government guaranteed healthcare in the US it drives the prices up.  Obamacare is even worse. 
Im not involved in the health service and have not looked into it in detail, but the principle of free healthcare and the "right" to a service is wrong.  We simply cannot afford it any longer.  We are broke.

Whats not mentioned in the table I linked is that Cuba, that socialist country which in theory shouldn't work, beats all those listed in terms of cost per capita and subsequent life-expectancies ($251/capita with life-expectancies at birth of 76/80 years for females/males respectively).  Thats not to say there aren't other issues associated with their communism, but healthcare isn't one of them.


If healthcare is guaranteed in the US why is it only reserved for the poor who can't afford insurance?  Why doesn't everyone stick two fingers up to the insurance companies and take the government guaranteed healthcare?

I'm not intricately familiar with the US system but would be very, very surprised if the governmental care provided to the poor is what pushes the cost up as it is done on a shoe-string budget, it won't be subsidised by the insurance companies.  It really is unnecessary tests and drugs that have little effect which push the cost up (contrary to the Hippocratic Oath), but if you can substantiate how Medicare (or whatever its called) pushes the cost per capita up I'm more than happy to eat humble pie.


I'm disappointed that anyone thinks "the principle of free healthcare and the 'right' to a service is wrong", it isn't in the slightest, its called altruism.

Its implementation may be being grossly mis-managed, but thats distinctly different from the principle that everyone has a basic right to life and assistance to sustain it when they require it.

[Fultonius]

I'm their accountant so I already know how taxation and most regulations affect them as it's my job to make sure it's as little as possible. I can honestly say that taxation has had zero effect on growth in any succesful business I've seen. If it's handled correctly then it shouldn't (and I don't mean not paying any).

What hinders the growth of most SMEs is not excessive taxation or "red tape", it's banks being fucking cunts about lending to perfectly viable businesses.

No, none receive any subsidies.

Word ^

In reality, corporation tax will only have an effect on a business if it is very easy to move locations to avoid it. (i.e. the banks). Other businesses just go to where the skills and markets are and then hire expensive accountants to minimise their tax liabilities.

[Johnny Brown]

Philo, are you suggesting our way out of the depression is exporting cars to developing countries. Why wouldn't it make more sense/profit to build them in developing countries?

Fultonius, have you been to Singapore? Its a big city crammed on a tiny island. That's it. Whilst I'm sure there is much to learn from their system, I can't help thinking there are many economies that can't be translated to, say, Iowa or the Highlands and Islands.

[slackline]

Technically yes we have no RIGHT to someone else's service.  You have a right to liberty and freedom and your life but that's about it.  That's all the government should do, protect your liberty and freedom. 
If we had competition in healthcare then the price would go down, eventually it will all collapse anyway so whether we have a right to healthcare or not does not matter because it will also go bankrupt.  Its a nice idea but eventually we will run out of money to keep it running.

You are right in saying that there isn't sufficient money available to maintain giving everyone every single possible treatment, regardless of how much benefit it can provide, and indeed healtcare does ultimately boil down to putting a price on people's heads.

Its given the fancy name Quality Adjusted Live Years (QALYs), because people have realised that its not how much longer you live, but the quality of life that individuals have relative to the cost of their treatment that is important.  Its why NICE don't recommend treatment with cancer wonder drug X that meant that Susan beat cancer lived another four years, because the median survival time for people given the drug is only three months during which they're in terrible pain.

[Fultonius]

Nope JB, I've not. And I do hear there are other issues in Singapore.

I just don't like the fact that the government seems keen to drift towards a "market driven healthcare system" without considering possible better alternatives. 

I'm pretty sure the only reason the current government are moving that way is due to lobbying from "interest groups" who stand to make huge profits out of a market driven private healthcare system.

Can we not think differently for a change?  What about some kind of health co-op? Something that runs like a business, but with strict rules for re-investment to prevent profit maximisation? Just chucking out ideas here!

[slackline]

Can we not think differently for a change?  What about some kind of health co-op? Something that runs like a business, but with strict rules for re-investment to prevent profit maximisation? Just chucking out ideas here!

Westfield Health a not-for-profit health insurer established in 1919 in Sheffield.

[philo]

You just have to look at the US off budget items like Medicare and Medicaid to realise that its a complete fuck up. 
Look at the off budget spending (which includes Medicare and Medicaid)

If someone does not have medical insurance they are always charged the most in the US.  Because they get the subsidies off the govt for that so they charge them as much as they can.

Yes people have a right to life and to live their lives as healthy as they can but they cannot have the right to someone else's service.  be it medicine, education, wealth, land etc.

Remember, all great nations come to an end due to financial reasons.  Every nation that has collapsed so far has moved from a gold standard.

[philo]

Philo, are you suggesting our way out of the depression is exporting cars to developing countries. Why wouldn't it make more sense/profit to build them in developing countries?

Fultonius, have you been to Singapore? Its a big city crammed on a tiny island. That's it. Whilst I'm sure there is much to learn from their system, I can't help thinking there are many economies that can't be translated to, say, Iowa or the Highlands and Islands.

The private sector creates jobs and wealth.  The only way we can get out of this depression is to export goods to pay off the debt we owe.  The other option is to default.  Or we can default by inflation our currency like the soviet system and what happened in Argentina. The main point is, we cannot go on importing goods and paying for it with thin air from the printing press.  No one will lend us any more money, and that is a good thing.  I read a quote once that said something on the lines of "if your buying land, you had better be able to mine it or farm it - anything as long as your not planning to build a house on it"