[andy popp]

It was the 0.5% interest rates that lead to people buying houses they could no way pay back when they reset or adjustment rate mortgages

Except interest rates didn't hit 0.5% until March 2009.

[tomtom]

The bubble we had from 2000-2007 was the problem, the solution is a recession.  When governments step in and prop up the bubble and try to re-inflate it, they only kick the can down the road and prolong the recession hence making it a depression.

I suspect they are trying to gently deflate the bubble rather than burst it...

[nik at work]

It was the 0.5% interest rates that lead to people buying houses they could no way pay back when they reset or adjustment rate mortgages

There's been a lot written here about economics which I know little about (if I find the time over the festive period I'd be quite interested in reading through and learning something). However unless I'm completely wrong the low interest rates came after the property boom didn't it? Although the property price crash with predicted 20% adjustment hasn't happened, perhaps the 0.5% interest prevented a deep crash? But it certainly wasn't around when people were getting 125% mortgages in silly season.

[philo]

It was the 0.5% interest rates that lead to people buying houses they could no way pay back when they reset or adjustment rate mortgages

Except interest rates didn't hit 0.5% until March 2009.

was talking about the US, sorry they were 1% in 07 not 0.5% sorry!
I was also talking about the US.  they came off it 1971.  The gold standard.

[andy popp]

No, the US came off in 1934. The Gold Standard classically understood was then dead in the water to be replaced by the Bretton Woods institutions (IMF, World Bank) from 1947. Anything post-war has been a gold standard only in a much looser sense. Still it continued to severely limit government room for manouevre and it would have been interesting to have seen the result if the US had not abandoned convertibility in 1971.

Some more economic history: Britain has run a negative balance of trade in manufactures since the last quarter of the nineteenth-century offset (massively for the most part) by a surplus on the balance of trade in services (not only financial services but also, for example returns on overseas investments, direct and indirect). Nonetheless, at the same time, Britain remains the seventh (or so) largest exporter of manufactures in the world and the sixth or seventh largest economy in the world (this fluctuates on the short run on relatively arbitrary factors such as exchange rates, exact measures etc.) The moral is that the economy is much more complex and subtle thing than you are painting it. At heart your arguments are flawed by extremely simplistic understanding of phenonema such as 'capitalism' and 'socialism'.

[Oldmanmatt]

You know P,if they do raise the interest rates; your gold is going to drop in value...

I agree on the gently deflate line too...

I remember the rate on my mortgage in 1990, at the time of collapse, was 17.5%. You couldn't get a 125% mrtg then and I was restricted to 4x my annual salary (net) and they refused to consider my wife's income at all.

I must have imagined that boom in post war America (and the UK, come to that).

Business is pretty good, again, in my industry. Not what it was in 2007, but growing rapidly.
Just spent a week with an ITALIAN company who have increased turnover by 125% on 2010. Up 300% on 2008. Funny, their workforce has increased by 100%, too...

Unemployment is up, here, but lower in percentage of population; than it was in the 80s. Leaving school in the 80s was scary...

If you want a case study of unbridled capitalism failing, ask Thesiger for some info on Dubai (and they are recovering).

Still not seeing how we are failing/Finished

Talk to someone who went through the collapse at the end of the 60s/early 70s. My old man was an Engineer who lost his job then and ended up as a Copper. Ask him about wages being cut in half...

I haven't seen this yet.

Again, the Gov did not create this crisis. If they bear any fault, it was the LACK of regulation, that allowed it to happen...

[stom]

Philo,  you seem to be very enthusiastic about this subject.  Others on this thread have been good enough to enlighten us about their backgrounds. Eg Oldmanmatt, thesiger, etc.  Would you be willing to inform us of yours?

[slackline]

Here you go:

http://www.cbsnews.com/2100-18560_162-2528226.html?pageNum=2&tag=contentMain;contentBody

I'd suggest that the situation described is a direct consequence of having a free market healthcare and law/legislation that means that despite expecting the population to insure themselves still provides cover for those who don't.

Quite how this is an argument for privatisation I can't quite fathom out.

I guess one option is to not provide it, but then you might get people robbing banks for $1 so they can get healthcare in prison (note that he had previously been employed for 17years , the original write-up I read included more details, that during that time he had had insurance, but when he lost his job he couldn't afford it).


Further to the links I provided on research as to whether privatisation improves healthcare, you can work it out for yourself....

Privatise hospitals and who's going to own/run them?

Companies, and pretty big ones at that.

What do the majority of companies, particularly under a free-market that you are proposing, seek to do (ultimately)?

Maximise return on their investment.

How do they achieve this?

Its not through improving treatments/care which are invariably costly, instead its 'efficency savings' or cutting corners in common parlance, which ultimately is detrimental to those it is supposed to be helping.

I've picked up on one very specific thread of what you originally wrote for the simple reason that its one area that I do know something about.  I don't disagree that there are problems, but your notion that privatising healthcare is sensible solution to reducing state costs is in my opinion wrong, and its wrong because not only will it lead to a deterioration in standards of care not an improvement as you think, it will mean that there are some people who are not treated as human beings simply because they don't have the cash to pay for it.

[Oldmanmatt]

Actually, you have a shinning example (?) of the health care issue, happening right here, right now.
Take a look at the problems with residential care for the elderly and disabled, which has been in private hands for sometime.
Do I need to provide links?
It has been reported on, at least weekly, for months now.
The problem, for me, is the notion that people are merely commodities, to be traded.
Insurance as the answer?
Ask someone who tried to claim against a PPI policy or against an income protection plan.

And in the end, we do pay insurance, it's called NI.
On that point does anyone know, if NI is ring fenced to welfare, and if it does cover the budget (or would if it was). I could accept, that we need to pay more NI and a small increase would surely increase the available budget dramatically.

We have the best part of three million unemployed.
There are 68 million (~) people in this country. How can 65 million people be bankrupted by supporting 3 million?

I know that is a highly simplified (to the point of facile) argument. But it is the core of the benefits/health care argument.

[Jaspersharpe]

On that point does anyone know, if NI is ring fenced to welfare

No it all goes in the same pot. This is why it would make more sense to scrap NI and simplify things by increasing the basic rate of tax etc. As it is, NI is a useful way for governments to disguise tax rises or make headline grabbing tax cuts while covering the cost with adjustments to NI.

[Oldmanmatt]

OMM went off half cocked this AM...
The UK population is just over 62M, not 68.
Still, my point stands.

Surely, ring fencing would be better? People would understand an NI rise, far better than a Tax rise.

[Jaspersharpe]

If people understood it then they wouldn't be able to hide stuff. What use would that be to politicians!?

[Andy B]

Philo....Others on this thread have been good enough to enlighten us about their backgrounds.....Would you be willing to inform us of yours?

I think it's Sloper in disguise.

The disguise being he's not being obnoxious. 

[philo]

Philo....Others on this thread have been good enough to enlighten us about their backgrounds.....Would you be willing to inform us of yours?

I think it's Sloper in disguise.

The disguise being he's not being obnoxious. 

Im really just a geek who reads too much.  I studied economics in part at uni but did a lot of side reading outside of it looking at other schools of thought.

I love liberty and the free markets and I agree with the Austrian Economics.

Oh btw, Im a teacher and spend most of my spare time reading up on economics.  Do not pay into a pension scheme, did not strike

[tomtom]

I agree with much of what you are saying Philo - that markets should be left to self stabilise (or perpetually shift between boom and bust at varying speeds) and that certain banks/countries should have been left to go bust/rebuild etc..

But I'd only if I'm playing a video game called 'World economics' and no-one is getting hurt... but thats not the case is it...

Economics makes some great models of how things work, but it is inept and flawed at accounting for people and peoples feelings. Theres nothing wrong with letting a bank go bust - or a country go to the wall - except for the people who lose all their money. Their jobs, their pensions, their savings, their houses. How do you put a cost on the suffering it would cause? How do you attach a £ to depression, hunger, detrimental health effects, increases in crime etc.. etc.. and what cost is the feeling of spending years wondering what is going to happen next?

You can not attach a cost to this.

There may well be economic reasons/viewpoints that differ to your opinions about why banks were bailed out, why the Euro is being propped up, why Greece is being sustained... but the real reason is social/political - that people will suffer - and all these measures are being taken to try and minimise pain and suffering to populations - who are usually voters too...

If life were sim city etc.. then you'd be right.. but it isnt.. 

[philo]

There may well be economic reasons/viewpoints that differ to your opinions about why banks were bailed out, why the Euro is being propped up, why Greece is being sustained... but the real reason is social/political - that people will suffer - and all these measures are being taken to try and minimise pain and suffering to populations - who are usually voters too...

If life were sim city etc.. then you'd be right.. but it isnt..

But propping it up and prolonging the recession is creating the largest economic crash that will happen regardless.  I said before, they will have to rename the "great depression" of the late 20/30s.   
All the bailouts are giving money to the very wealthy at the expense of the tax payer.  The reason is political, buying votes.  Unemployment is rising, inflation is rising, we have been like this since late 07.  4 years of decline, we are meant to be recovering. 
Look at the recession of 1920/21 in the US. it was over in a year.  When it happened again in the late 20s, the government stepped in and stimulated the economy and prolonged the problem.  We call this the depression.

If they got out of the way and allowed the mal-investments to be lost in 2007/8 then we would have had a deeper recession.  Would it be painful? of course it would be.  But are we any better off than we were then? 
What I hate most is when people say the government need to FIX the economy.  Free people fix things not the governments, we will never be fixed until we have the correction that should have occurred. 

[Stubbs]

I love liberty and the free markets and I agree with the Austrian Economics.

Oh btw, Im a teacher and spend most of my spare time reading up on economics.  Do not pay into a pension scheme, did not strike

What is this liberty you speak of, liberty to do what exactly?

[philo]

lib·er·ty/ˈlibərtē/
Noun:   
The state of being free within society from oppressive restrictions imposed by authority on one's way of life.
An instance of this; a right or privilege, esp. a statutory one.

Economic freedom:

"The free market viewpoint understands economic liberty as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud or theft. This is embodied in the rule of law, property rights and freedom of contract, and characterized by external and internal openness of the markets, the protection of property rights and freedom of economic initiative"

[Stubbs]

Well that seems like a lovely idea, such a shame we don't live in a world where it can work.

[tomtom]

There may well be economic reasons/viewpoints that differ to your opinions about why banks were bailed out, why the Euro is being propped up, why Greece is being sustained... but the real reason is social/political - that people will suffer - and all these measures are being taken to try and minimise pain and suffering to populations - who are usually voters too...

If life were sim city etc.. then you'd be right.. but it isnt..

But propping it up and prolonging the recession is creating the largest economic crash that will happen regardless.  I said before, they will have to rename the "great depression" of the late 20/30s.   
All the bailouts are giving money to the very wealthy at the expense of the tax payer.  The reason is political, buying votes.  Unemployment is rising, inflation is rising, we have been like this since late 07.  4 years of decline, we are meant to be recovering. 

Maybe it will Philo,
But changing things rapidly is dangerous.. There are lag times in economies, and peoples lives! Not everyone will or can up sticks and move somewhere for work for example.. It takes time.. Some people have events in their lives that mean they cannot change rapidly (children, illness, for example). While it may be seductively simple to let things crash then re-build, people don't work that way..

Political maybe, but politics does (in a sometimes twisted way) represent what people want - or they'd get voted out (hence the prevailing centralist govts in Europe)....

I'll throw this one at you. Two nations with very heavily regulated financial and domestic banking systems are doing pretty well at the moment.. Sweden and Austraila. Australia of course has loads of resources to sit back on but the global wave of financial uncertainty is but a ripple there...

[philo]

also take a look at chinas housing bubble in some of the large city's. it's all brilliant in the boom part of the bubble but the bust has to be hard.  If it wasn't hard then what lessons do we teach people about risk and bad investment?  Your right that people don't like change and might not like the way the change is going but medicine tastes bad but you must swallow it.

these artificial highs are like a heroin addict complaining about the withdrawals and getting another shot.  The solution is to go cold turkey, it is the same for our economy.  The central banks are just giving the economy another shot but we need to clean the system of all of the toxic assets.  We are at risk of killing the economy with an overdose

[slackline]

I would argue that if we had more choice and competition within the health service, that would drive prices down and the quality up - not because of regulation but because who would pay to go to a hospital with high death rates etc etc?

Then you'd have to find some evidence to support that argument because most of it suggests it doesn't (e.g. Propper et al. and Scanion et al. 2008).

Clocked the following paper this morning which looks at healthcare in China, the title says it all with regards to the effect privatisation has (i.e. maximisation of profits) and reinforces the point I made that it results in over-prescription (although there is the caveat in this case of cultural bias)...

Reynolds L, McKee M (2011) Serve the people or close the sale? Profit-driven overuse of injections and infusions in China's market-based healthcare system The International Journal of Health Planning and Management 26: 449-470

[Bonjoy]

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

What made Britain 'great' was a huge amount of indigenous coal, plus rapacious imperialism. We no longer have the former (nor any analogue), the latter is not a realistic or desirable option today. Everyone one is on a grand race to the bottom in the hope of export led recovery. I don't think we even stand a chance of attaining the pyrrhic victory of winning this race.

[philo]

you are right about the race to the bottom.  the US dollar will collapse first.  The euro has meant people have temporarily stopped looking at the US debt crisis but that will be the first to go.  We won't be far behind them, and the Euro will inevitably split into the north (germans maybe france and a couple others) and the PIGS will leave the euro.  This could take a year or 5 but it will happen

[slackline]

Still think privatisation of healthcare improves its standards as you were positing philo?