UKC

Sensible, objective discussion here - https://www.thersa.org/discover/publications-and-articles/rsa-blogs/2015/09...

Main point - there are arguments for and against but it's definitely not crazy.

In reply to Donald82:

Agreed. I'm an accountant (chartered, qualified 'n all) and read through it all with a thought that it all appeared a reasonable proposal and worth chatting about. Also, contrary to other politicians, Corbyn appears prepared to actually chat about these things rather than simply impose them. Obviously devil is, and will be, in the detail, but on initial reading don't have a problem.

I am watching the frothing-at-the-mouth by what appears to be the entire PLP and the vitriolic attacks from the entire media with a degree of bemusement.

I'm perfectly aware that a more socialist government would leave me with less money in my pocket, but I'm fine with that. On the other hand, if the government were doing their job and supporting the most vulnerable in society then I might feel able to reduce contributions to some of the more chronically-underfunded charities (though we'd probably swap it elsewhere). Who knows?

In reply to John_Hat:

My biggest issue is if he removes the independence of the B of E. Politicians need to be kept away from this institution.

In reply to Donald82:

I love this,

"What is not helpful is to hear immediate cries of “Hyperinflation!”, “Robert Mugabe” and “Weimar Republic” trying to drown out any consideration of the actual evidence or theory behind the idea of QE for investment. These are not meant as contributions to a meaningful debate. They are meant as ways to close down and prevent meaningful debate of new and unfamiliar policy proposals. "

Pretty much says it all about the media and those that buy their line on JC.

In reply to Shani:

Er, yes, you mean except that the OP links to several mainstream media articles making serious critiques of JC's policies?

In reply to Shani:

Yeah, spot on

In reply to John_Hat:

Yup

In reply to Donald82: That article nails the hysteria we hear about Corbyn - perfectly expressed in this post from Summo (http://www.ukclimbing.com/forums/t.php?t=624478&v=1#x8131967)

"Yep, he is taking the UK, or rather only Labour, right back to 1975... Life on Mars, political style!!

Big national strikes, CND marches, failing nationalised industries, power cuts, soaring interest rates, almost hyper inflation etc.. oh the UK must be so excited, with this to look forward to. I guess it would make Greece look a rosier comparatively."

In reply to Donald82:

I don't understand the first thing about economics, so I'm in no position to try and enter into debate about it.

My big worry is that sniping from within his party and flack from the papers will lead to his overhaul before he's had a chance to sell his position to the public from a fair platform. Then the status quo will be resumed and it will be declared as a victory for the consensus viewpoint of austerity without any debate having occurred.

In reply to Shani:

Lolz. Summo thinks because we've eventually had some sort of recovery Tory economic policy has been a success.

In reply to Trevers:

Yeah. Our media and politicians have done us a massive disservice when it comes to explaining the economic choices facing the country.

In reply to Donald82:

the UK hasn't recovered, it still can't and isn't running an annual surplus, inflation & growth is absent/minimal, personal debt isn't any better... all this whilst the world is still teetering on along a recession knife edge.

Corbyn thinks the solution to the UK's woes is print money, spend it, borrow some more money, spend it. Hope that eventually something happens in the UK, Europe or World for economies to pick up and pay off all this money. It might never happen, Europe or the West has had it's day, the best in the west, can potentially grab the coat tails of the rising east etc.. and hope to get pulled along. The worst of the West (southern Europe), will probably slowly drift towards third world status, being bank rolled by Northern Europe (france/Germany) to maintain some sort of living and stop the EU folding.

No doubt the lefties will be along in a minute and I'll get lots of character attacks, dislikes, told I don't understand economics and generally avoid debating the point. As usual.

In reply to John_Hat:

I agree, but I can't see Corbyn policies working at all. They are too extreme and seem to rely on magic money pots and levels of taxation that simply won't work in the UK for at least 20-25years until the housing costs are brought down and those with massive mortgages have cleared a fair chunk of them. Those working simply can't adjust their lifestyles to fund the kind of benefits system Corbyn aspires to.

I've lived with a relatively socialist/moderate government in Sweden for some time, the vulnerable are looked after, things are pretty equal (although there are always moaners), but also people have to look after themselves, benefits exist, but they aren't open ended or free, there is some collective or society responsibility. As well as a highish tax rate, those employed pay A-kassa, an employment insurance which pay outs for 300days, but drops a little after 100days, after 300days it ends, you need to find work and be employed for a year, for it to start fully again.

Corbyn's vision of open ended, uncapped benefits, on normal taxation is just the stuff of dreams, yet on day1 in the labour hot seat he promised it. Madness.

In reply to summo:

Well, I do seem to remember you being on here calling the Tories' economic policies a success before. And maybe, just maybe, the lefties were arguing the point and you really just didn't understand.... who knows. No need for any nastiness though

In reply to Donald82:


Care to quote? Never, ever said a success, but they do have more chance of sorting out the UK long term, than more Labour borrowing & spending, growing the public sector etc.. same old labour buy the voters rhetoric. There is a difference.

What is a success? Perhaps a success is after the past few years still having a decent credit rating, a shrinking annual deficit, better employment that the PIIGS nations, no IMF bail outs etc.. success is a relative term these days.

In reply to Donald82:

Just scanned the article. This bit caught my eye

"Furthermore, a surplus in one sector of the economy must be matched by a deficit somewhere else. You cannot have a surplus in all sectors at once. This is not a question of ideology, but accounting. But the revelation that if you support a government surplus you are effectively supporting an increase in private household debt would probably come as news to most people. "

This is certainly news to me. What does the author mean? Norway has a large government surplus, I am not aware of its population being heavily indebted. Can someone explain, or is this nonsense?

In reply to MG:
There is slightly higher personal debt in Norway and Sweden, mainly in property though. Both countries have taken measures in the past year to reduce it by changing mortgage legislation, where you must now pay off a percentage of a mortgage(only applying to new loans, not existing), rather than people simply paying the interest for their entire lives. Basically renting off the bank. This worked because housing outside the cities is cheaper than most parts of northern Europe. You can buy a rural 4 or 5 bed detached house, a big garden etc.. for a £100k or often less. Interest only payments are cheaper than renting.

Plus, if you make a profit on sale of your home, you don't pay tax if the money goes into another home. So people always tend to upgrade, borrowing more, rather than down size and pay tax.

In reply to summo:
Ok, but is that related to government surpluses in any way?

In reply to MG:

of course not, it doesn't really even correlate, never mind causation.

If anything it is to do with housing prices creeping up since the European recession, whilst wages have anything lagged behind a little. So statistically as personal debt is benchmarked against earnings, it has climbed a little recently. Sweden generally always balances, pre 2010, it was a little over, since then it's been a little under, but we are talking about plus or minus marginal percentage points of GDP in terms of borrowing or surpluses.

Immigration also is increasing housing pressure in some locations, but people coming here don't come because they hear that Sweden ran a 1.7% budget surplus to GDP!! So they aren't linked either. There is plenty building going on, everywhere, but the current wave of refugees aren't endearing themselves to the locals in many southern towns and villages, many are complaining about the weather, having to walk to the shops, generally cook and clean for themselves, or the fact they aren't in nice hotels, but are instead placed in local housing. Wait until winter starts!

In reply to summo:

Not really keen on trawling UKC for quote.

I just recall you 1. thinking austerity in a recession with low rates is a good idea and 2. using the fact that we'd started to a grow a wee bit as evidence supporting that view.

Here I was mentioning 2. as evidence of your not really being worth having an argument with

In reply to MG:


People not understanding this, is exactly why the Tories get away with peddling economically illiterate DEBT BAD!!! stories about household budgets and credit cards.

Basic point is this. You can't have borrowing without lending. If someone runs a surplus, ie lends, someone must run a deficit, ie borrow. (This is just a fact)

The piece your missing though is countries as a whole can run a surplus (eg Norway) or deficit( eg UK). I wouldn't be surprised if they do have quite high household debt though. I know Denmark does.

In reply to Donald82:


But having a surplus isn't the same as lending. A government that raises one pound more than its spends in tax doesn't need to lend that money, and there is no obligation for anyone to take it as a loan.




That is exactly the opposite what article seemed to be arguing.

"Furthermore, a surplus in one sector of the economy must be matched by a deficit somewhere else"

In reply to Donald82:

Also, what does the author mean by

"Second, Corbynomics calls for a more progressive tax system and increased wages to reverse the long trend of workers getting a smaller and smaller proportion of national income."

First tax rates are much lower than in the 1970s and early 80s and second, Corbyn is proposing raising them thus reducing what "workers" get.

In reply to Donald82:
But countries which have high levels of personal debt are trying to reduce them, the reason countries such as the Scandinavian three weathered the recession, is because they weren't running massive deficits and didn't have to slash budgets etc.. or raid the banks to fund in country initiatives. Sweden had it's own banking crisis and reform many years ago. Denmark and Norway had oil income as a buffer which until 12mths ago, was priced very high. You are in general terms comparing chalk and cheese, desperately looking for a correlation between any country and high borrowing, to then try and say look, excessive borrowing works, but there isn't one.


Denmark has ran a deficit on recent times though (historically it's up and down through the decades). Beside the 3 scandi nations are all massively different in terms of economics and politics. It's easy to view them collectively from the outside, they share common traits and at times allegiances, but their politics, location, history and resources are pushing them in different directions. So the UK thinking it can assume some Scandic model and enjoy a better lifestyle is flawed.

In reply to Donald82:

Quick to misquote, slow to correct, you're like a tabloid, squeezing in the apology on page 34.


1. No, repaying debt, cutting excessive spending and overheads is sound practice, when you are borrowing like no tomorrow. Streamlining or whatever term you pick. UK public sector spending was out of control, there is no other term for it. Not to mention PFIs up the ying yang, which will cripple the UK for years to come.
2. Never suggested a smidgen of growth as evidence of UK recovery. It's doing better comparatively than most, who have tried various other solutions though. But, there is no template for economics, as circumstance change and it's always new ground. So it can't really be claimed Corbyn's policies would solve anything (as they have happened and no other countries is using that model), but it can be claimed that UK's 'current' policies have helped the UK do better than others in recent times, as there is historical evidence for it.


I would argue the same, if you are just simply making up quotes of what people have said.

In reply to summo:


Now about this implication that public sector spending was out of control under Labour and thus caused our debt, as Figure 1.6 show in this link, according to the IMF the reason the UK has experienced a large build up in public debt is because of the costs of the large loss of output following the crisis." (www.imf.org/external/pubs/ft/reo/2011/eur/eng/pdf/c1.pdf).

Also, Osborne came to office where debt was around £985bn. In 2017, debt is expected to reach 1.6tn.


Again in that paper above, note that Germany provided a bigger fiscal stimulus than did the UK. As you are also chosing to take a pop at Corbynomics specifically, did you notice today that two Chinese State-owned nuclear companies are going to fund a French state-run energy company to build a new nuclear powers station backed by £2bn in UK govt guarantees? So the UK tax payer is picking up the risk, but the ROI will go to China.

In reply to Shani:

"Also, Osborne came to office where debt was around £985bn. In 2017, debt is expected to reach 1.6tn. "

Thus exposing the austerity lie?

In reply to Bjartur i Sumarhus:



More exposing the Tories are a safe pair of hands lie!

In reply to The New NickB:


So to demonstrate competence you would have wanted even less government spending over the last 7 years?

In reply to MG:

Lack of growth, especially when they were throttling the economy 2010-2012, would appear to be more of an issue.

In reply to MG:

Austerity is a recipe for disaster in the current economic climate as austerity (the policy of cutting state spending to solve debt and growth problems), is premised on the idea that saving leads to investment, and investment leads to growth (and in contrast, that spending leads to consumption, and consumption leads to debt).

For people to save, they need income. Wages have barely moved for years. If everyone 'saves at the same time' by cutting spending then the result is a shrinking economy (falling GDP), and so debt increases. Every European country that has undergone an austerity program since 2010 now has more debt, not less.

Our problems are demand side - as evidenced by low productivity, low inflation and low interest rates. Austerity DOES work - but not when EVERYONE is doing it.

In reply to Shani:


Problems are/were clearly on both sides. The rapidly rising debt over the last few years shows we haven't actually had that much austerity. Pretty much everyone agrees it has to be a balance between cutting government spending and spurring growth, the only argument is over where the balance lies. Personally I think the Tories with aggressive rhetoric (to please the party members) but in fact quite moderate spending cuts in reality have got it about right. By contrast I think Corbyn probably has about the right rhetoric in terms of time-scales and plans but if in power would in reality spend far too much (to please the party members and hangers-on).

In reply to MG:

No, the problem with the economy is demand side. If there was a problem with supply side there would be inflation (as we see with housing - a subset of the economy).

The notion of 'balance' is appealing but allow conflation with household/individual debt, rather that macroeconomic reality. Rising debt is caused by contraction - a contraction inevitable in an austerity program in a world of austerity. As Simon Wren Lewis notes,

"It will be some time before economists settle on a number for the total cost of the austerity mistake, but a conservative estimate would be that, in total, resources worth around 5 per cent of GDP will have been lost for ever by delaying the recovery. That’s about £100 billion, or £1500 for each adult and child in the country."

http://www.lrb.co.uk/v37/n04/simon-wren-lewis/the-austerity-con

In reply to Shani:

but that is total public debt or borrowing, until the annual deficit becomes a surplus then the total debt will still increase. But, the annual deficit is shrinking, in this july (a good tax month of course) it was an annual surplus, which is a rare event in the past 10 years.



And you point there is ? Germany was also in recession for two quarters last year, narrowly avoiding being in 'official' recession by getting some growth in the last quarter, largely down to the low oil price. Germany is a truly unique fish, it's torn in all directions.

In reply to MG:

Its why you need an independent B of E and also the OBR to keep the politicians of both sides in check. And why I disagree with Corbyn as his plans involved bringing the BofE back under govt control( well that was his promise, whether he sticks by it is a different thing).

Growth in a mature economy like our is never going to be superb. We will just tick along at a few % for the next good few decades. It will bounce up and down.So we can ill afford politicians promises on spending, as ultimately it is those who are less well off who suffer ( Carney said the same thing the other week).

In reply to Shani:
Perhaps the reality is that the West, China and now the slightly nearer East in India are all trying to grow too fast, by borrowing in general. Thinking that growth is bound to catch up eventually and clear the debt. But at no point does anyone stop and allow the growth to catch up. Instead they just borrow more to fund the growth. I think in general we are kidding ourselves. The UK / USA has borrowed heavily from china in various shapes and forms, which has maintained demand in China, who in turn have borrowed massively to maintain growth/demand at their end.. there isn't really any sustainable growth, only borrowing. Sooner or later, it's going to burst in a pretty big fashion. 1930s or worse style probably.

Without taking a hit on our standard of living now, having less things and less money in our pockets, then the West isn't going to make any headway and if the next recession comes, which is currently given 50/50 odds it's china initiated and soon, then any debt ridden countries will be completely stuffed.

In reply to Shani:

I simply don't agree. The deficit peaked at 11% of GDP - that wasn't just due to lack demand.


This line is popular at the moment. Of course there are differences, but fundamentally spending more than you earn over the long-term doesn't work in either case. "But a country isn't a household" basically seems to be an excuse for proposing spending money we don't/won't ever have to me.

In reply to MG:

No, its fundamental to the whole way we should look at macroeconomics.

Imagine, if you were a household, and that you could simply create money. Literally just type "I have a million quid" into a computer and it happens.

Imagine you were immortal, and would earn forever. No need to think about retirement, no need to think about tailing off earning power.

Imagine it was your decision as to how much money you were paid. But the amount you are paid is dependent on how much you spend.

Imagine if the whole system which controls all of your debt was under your control.

Also imagine you have a 400-year record of not defaulting on your debts and have debt and debt repayments at very nearly historic lows, and have coped easily with a debt burden many times the current situation.

It would change the way you would look at debt, I think.

http://www.theguardian.com/money/us-money-blog/2013/mar/26/federal-budget-h...
http://falseeconomy.org.uk/cure/whats-the-best-way-to-reduce-the-deficit
http://www.rooseveltinstitute.org/new-roosevelt/federal-budget-not-househol...
http://www.newstatesman.com/politics/2015/03/nation-states-arent-households...

Quoting the last one:

"“Balancing the books” has little to do with economics, and everything to do with a political desire to cut public spending and shrink the state. But countering it is difficult, because its metaphors have such visual and moral clarity. In reality, macroeconomics is counterintuitive."

In reply to MG:

First, this doesn’t depend on the surplus being directly leant through a new loan. It might, for example, pay down existing debt to the private sector, which would increase private sector borrowing/reduce its saving.

I take you general point though – what happens if they put the money in a mattress? Well, if one sector TRIES to run a surplus but the other sectors don’t borrow it, then total GDP falls and they don’t actually manage to run a surplus at all.

Does that make sense?

It’s quite hard to get your head round – I can do a simple two person economy example working from the principle that all income is someone else’s spending and vice versa, if that’s helpful.

Also, the guys definitely not arguing that countries can’t run surpluses or deficits to the rest of the world. One of the ‘sectors’ is foreign trade (ie exports – imports which equals net lending/borrowing to from rest of world).

In reply to MG:




He's means taxes will be higher for the rich and lower for the poor and there'll be measures to increases wages.

More generally higher taxes over all doesn't mean less money for workers. It depends how it's spent.

And since, I think, the 70s most growth has accrued to rich people, so workers share of the total has fallen.

In reply to The New NickB:

Now that's an argument worth exploring! and one that might yield decent results I suspect. But austerity I don't buy so easily. How austere is it that we had to borrow more than nine thousand million pounds last month alone just cover the deficit? We get caught up using and debating these words which are used completely inappropriately (and I am pointing the finger at all parties here) I just think the argument has been framed for us to avoid looking at the reality (as you have hit upon IMO)

In reply to John_Hat:


That would indeed be a wonderful thing for either a state or a individual but of course neither can actually do that. Well a state can, but the value (which is the important thing) of each pound is affected when it does. It's not a free lunch.


Again that would be wonderful. BUt assuming the UK is going to earn more and more for ever and ever is to say the least optimistic. Recent history suggests we are struggling to stand still and competition from abroad is only going to increase. Gambling our future on an ability to earn ever more is rash.


Again we can't create value out of fresh air. There are clearly differences but you can't get away from the fact that spending more than you earn can't go on indefinitely.

In reply to Donald82:



No


Probably because it is not true - there are plenty of countries running a surplus, or small debt, that do not have heavily indebted private economies.

In reply to MG:


The UK has been continuously in debt for more than 400 years. Whilst not "indefintely" this appears long enough to demonstrate the point.

Please read up on the links I posted and try and learn a lot more about macroeconomics. You are continuing to equate household and soveriegn debt. End of this discussion for me.

In reply to John_Hat:


In debt and spending more than you earn are not the same thing. Our debt to GDP has gone up and down - had it gone up continuously we would have collapsed.

>End of this discussion for me.

I.e. you know you are wrong but can't admit it.

In reply to John_Hat:


not strictly true, national debt as a % of GPD pre WW1 was very low, around 2000 it was very low too. With many minor improvements in between these larger ones.

In reply to John_Hat:

That is fine, but as the Liberal party have pointed out the actual cost of financing the debt- interest payments - is about equivalent to the cost of running the education budget ( from what I remember). So you just cannot keep adding to it without a control somewhere.

In reply to summo:

https://en.wikipedia.org/wiki/United_Kingdom_national_debt#/media/File:UK_G...

In reply to malx: Good link, shows we've been in surplus for roughly half the history of state borrowing.

In reply to Mike Stretford:

I don't think it does - It's debt as a % of GDP. The debt appears to fall but it could just be because the GDP grows

In reply to Donald82:

Not read the article, but I have to say that I find him a lot more encouraging than a government that says two contrasting things:

a) "we have a moral obligation to reduce tax" whcih I personally find pretty stupid when at the same time they are saying:
b) we need to balance the books and reduce debt.

To me b) required raising a bit more cash whilst a) provides less cash - are these guys thick or what? To which the answer is "probably yes" since their first attempt at austerity resulted in a double-dip recession and yet they still carry on with the dogma.

For me the historical precedent seems to be that you spend money on infrastructure and capability to allow growth. Low tax on business and rich people alone won't cut it. The biggest barrier to growth in the UK seems to be lack of investment in infrastructure, high speed internet, trains, housing, power stations.... We are never going to achieve any of that with a tax cutting government.

There doesn't seem to be a precedent of austerity fixing the type of economic problems we have today so it seems like its a cover story for something else.

In reply to MG:

This for me is a point that needs to be drilled home for all the "just print more money" people. Yes the state can print more money, but money is ultimately just a numerical representation of the value of goods and services.

A country can print as much new money as it likes but it can't magic up more raw materials, industry, jobs, services etc.

Ultimately, if you assign a higher number of pounds to the same amount of output all that happens is things have a higher pound value (aka inflation) and the exchange rate compared to other countries drops because £1 represents less stuff now.

The UK could make everyone millionaires but everyone would still have the same amount of stuff. The poor will still be poor and the rich still be rich, all that happens is the numbers change.

In reply to petellis:


Laffer curve. Oh, and it turns out there wasn't a "double dip"recession.

In reply to Lord_ash2000:

Quite.

While there is some coupling between printing money and economic output (the real difference as far as I can see between a state and an individual), ultimately we have to pay our way. This bit seems to be (deliberately?) glossed over by Corbynites.

In reply to malx:


Good point re gdp, but inflation adjusted to 2005 and there are still long periods of surplus

http://www.ukpublicspending.co.uk/spending_chart_1692_2016UKd_15c1li011lcn_...

In reply to malx:

thanks, highlights the low debt perfectly. Especially around 2000.

In reply to MG:

I sense you're not too keen to understand it. Happy to try to explain if you are.

In reply to Donald82:


Well if you can offer a clear explanation of why the following is true, I would be interested. Comments so far, and looking at the state of play with government around the world, make me think it isn't

"But the revelation that if you support a government surplus you are effectively supporting an increase in private household debt would probably come as news to most people. "

In reply to Lord_ash2000:


It depends on whether the printed money is used to put resources that would otherwise be unused to work. If it is, it increases real output. If it's not, it's inflationary.

The point that needs to be drilled home is that nobody is proposing "just print more money." And nobody thinks you can "just print more money".

In reply to Lord_ash2000:

Yes - along with things like business/market activity, and a perception of some future return.


So this Chinese state funded project to get the French government to build the UK's nextgen nuclear powerstations, tell me, we are taking the risk but WHERE will the UK get the money from to underwrite the debt?

Where will the profits from this Chinese investment go? I see that the Chinese will get a profit on their investment (without risk), and French engineers will be employed to design and build this thing....but what of UK investors? Why can't they get in on the investment? What of the French jobs we will create? Why can't we create jobs for the UK population?


And yet what are the economic conditions at the moment - after printing well over £200bn since 2010? What is inflation doing? What is happening to Sterling against the Euro? What has happened to government borrowing rates?

In reply to Shani:


Tax, or assumed future tax payments.

The French have an off-the-shelf type of nuclear reactor to sell, UK companies haven't.


Are you saying this is evidence that printing money has no effect on inflation?

In reply to MG:
Okay. This is quite hard to explain. Let’s start with a worked example to show why if someone wants to save, then someone else has to be willing to borrow – otherwise, instead of saving, you just get lower incomes.

Consider a two person economy of MG and Shani.

Every year MG spends £10 on whatever Shani makes and vice versa. So both have an income of £10 and spend £10. Neither borrows or lends so borrowing/lending sum to zero. GDP is £20.

Now, suppose MG decides he wants to save £1. He needs to cut his spending to £9. But..... this also cuts Shani’s income to £9. Shani has two options here -

Option 1. Borrow the £1 from MG and keep buying £10 MG stuff. In this case MG lends £1 and Shani borrows £1. Everything’s in balance – borrowing and lending sum to zero.

Option 2. Cut his own spending to £9. In this case MG’s income falls to £9 and he doesn’t actually manage to save anything. So borrowing or lending sum to zero.

So what’s happening here is that MG can’t save unless Shani is willing to borrow.

Does that make sense?

In reply to Donald82:
Well in that scenario what you say is true but

1) Costs seem to be fixed. If MG to reduces his costs by £1, he can save a pound while nothing else changes.
2) There doesn't seem to be a government at all - my question was about government surplus vs private debt.

Both 1 and 2 are clearly present in the real world so I still think the claim is wrong.

In reply to MG:

He doesn’t have costs in cash terms – just his time – so he can’t save money by reducing his costs. But if he did, reducing his costs in order to save money would reduce someone else’s income. And in a two person economy that would have to be Shani’s so by reducing his costs in order to save, he would reduce Shani’s income.

The key point here is all income is spending and vice versa.

If this now makes sense for this simple example, I’ll introduce government.

In reply to Donald82:


Well OK, MG saves his time by being more efficient. He now has that spare time to produce whatever Shani is producing himself without the need to pay Shani £10. MG still sells his product to luddite Shani for £10. Shani has £0 MG £20. MG made a £10 surplus, no one is in debt. Next year Shani dies of starvation.

In reply to Donald82:

only the world, or a country isn't a 2 person nation. They could perhaps be borrowing at differing interest rates, or different time scales. They may have differing taxes and have differing overheads etc.. Money doesn't move back and forth in such simply terms.

The reality is MG is in the UK, paying tax there so people provide services which have no saleable value, only improving quality of life for MG, but MG has no savings. Shani is in China not paying much tax, life is a little grimmer, but he is sending his money to HSBC in Hong Kong where he gets interest on it.

MG decides to save for the future and banks a £1, Shani then saves a £1 less. Less money exiting the UK and MG eventually spends his money on a British made Norton motorbike, he is very happy. China struggles a little with less tax, shares slide, so it devalues it's currency and HSBC centralises to cut it's overheads. Shani is not a happy bunny.

In reply to Summo: 'This worked because housing outside the cities is cheaper than most parts of northern Europe. You can buy a rural 4 or 5 bed detached house, a big garden etc.. for a £100k or often less'
Perhaps 2o years ago, but now.... I'm not sure where you're looking... but I'd like to know

In reply to Shani:

" I see that the Chinese will get a profit on their investment (without risk), and French engineers will be employed to design and build this thing....but what of UK investors? Why can't they get in on the investment? What of the French jobs we will create? Why can't we create jobs for the UK population?"

This is the most ill advised venture since some toff student decided to perform porcine necro coitus. If we fall out of love with China they will just press "begin meltdown" on their remote control..

But seriously, I suspect that there will be a lot of UK based jobs created from this new nuclear power plant. Also UK investors can buy shares in EDF if they think this is a no brainer and going to make lots of money. Why we can't keep this build totally in house is another argument. We can build Vanguard subs with Rolls Royce nuclear power plants so why not a domestic power plant? I suspect the government think a £2b guarantee is a lot cheaper than the £24b required to build the thing (no doubt that cost would soar if it really was built in house) . The govt will still collect taxes from the energy bills sent from this power plant. Worryingly the French don't have a perfect record of bringing in Nuclear power station in on time and in budget....but would we be any better?

In reply to wbo:



http://www.hemnet.se/resultat

Quite a lot to go at, happy hunting.

In reply to MG:

Well, if MG makes everything himself and doesn’t buy from Shani, then borrowing still sums to zero. Either because Shani borrows the £10 from MG or because he doesn’t borrow and MG’s income falls to zero – ie Shani stops spending. (Or somewhere in between.)

Of course, MG is now fine either way – even if he has no income he can make everything himself. But in real life most people don’t have the option to make most things themselves.

I’m trying my best to explain a generally accepted (but not that intuitive) economic concept in a simple step by step way. This example is simply to show that for one person to earn more than they spend, someone else must earn less than they spend. If you get that we can move on to how this works at a national level with governments. Otherwise I think best just to leave it there. 

In reply to Donald82:


If it is generally accepted, perhaps point to some online summaries of the idea.

This example is simply to show that for one person to earn more than they spend, someone else must earn less than they spend.

That seems to be as assuming there is a fixed amount of value in the world, when there isn't. The claims that one man's gain is another's loss is simply false.

In reply to Donald82:

The point is MG now has a surplus, with, as you note, no borrowing. In other words a surplus in one area doesn't imply debt elsewhere, as I was saying.

In reply to MG:


Have they? I thought their previous attempts were still works in progress aka running stupidly high over budget and time.

In reply to KevinD:

Well OK, they *say* they do.

In reply to MG:


Perhaps they will do once the UK has paid for another further iteration of development required to get it to OTS status. But by all accounts, the technology we are buying is far from boiler plate.

In reply to MG:

He only has a surplus if Shani borrows the money and spends it.

Otherwise he has no income.

In reply to MG:


So here is a question for you that feeds back in to QE, money printing and wealth creation. Ignoring what is visible as transferal of money such that it accumulates with one person over another, how do we actually create money (not paper and notes, but the wealth behind it) in an economy?

In reply to MG:


This isn't assuming that. Or claiming that. It's just about the how money flows

In reply to Shani:
Mainly by being better at stuff than we used to be. If I can, for example, kill two boar a day rather than one, I have created value due to having that skill. Someone else no longer has to kill their one boar a day to survive but can do whatever they do well, perhaps growing apples. I swap my spare boar for their spare bushel of apples and we are both better off - i.e wealthier. Paper money represents boar killing or apple growing ability and is convenient.

In reply to Donald82:


It is. See post above for why that is wrong.

In reply to MG:


Erm, no. Just had a load of work to do. .

In reply to MG:

It's not implying that MG can't make more stuff himself. But if he does and he stops buying from Shani, then Shani's income falls and he either 1. borrows the money from MG, or 2. he stops buying from MG and MG's income falls, so he can't save.

Shani can still make his stuff, and MG can make his stuff. But either Shani borrows money and MG saves money, or no one borrows money and no one saves money.

In reply to Donald82:
In the situation I described MG ends the year ahead, Shani is broke but not in debt (and shortly to die). MG has a surplus but there is no debt, hence in this economy at least a surplus does not imply a debt.

In reply to MG:

Income and spending are flows, debt and savings are stocks.

Another way of thinking about this - imagine there's only £1 in our imaginary economy. MG can't save more than £1 unless someone else agrees to borrow it. He can save the stuff he makes, but not money.

Anyway... I really wish I could explain this better to you. I think part of the problem is that you think it's trying to prove things it's not trying to prove. For example, that it claims one man's gain is another mans loss - it doesn't. Or that if a government runs a surplus means that the private sector is highly indebted - it doesn't.

If we could get past the initial example to understand that you really can't save money if no one will borrow it, then we could get on to those things.

It is quite difficult though.

RE summaries on the internet. All the ones I can find are at the sectoral level - Wikipedia 'Sectoral Balances' is okay - but if we're stuck on this, I don't think they'll help much.

In reply to MG:


What you are describing there is a system of trade based upon a commodities. Things which we can trade and a mechanism, money, in which value (the return from selling a boar) can be stored until autumn comes around and you can then buy fresh apples. Agreed?

In reply to Shani:

Go on

In reply to MG:


So the intermediary between the boar and the apples; how do we agree the value of that? How can we agree what value it holds?

In reply to Shani:

Probably control how much there is of it. D Adams suggested using leaves was unwise.

In reply to MG:

David Cameron shagged a dead pig in the mouth.

In reply to MG:


Yes, that is one of the properties of money, there has to be a degree of scarcity. Thus we've seen gold used as a currency which has an innate scarcity. But what of notes and coins. The materials they're made of are not at all scarce are they?

In reply to Shani:


But coins and notes aren't technically supposed to have value in and of themselves are they? It's supposed to be acknowledgement of a debt owed.

(except quite clearly notes and coins do have value cos finding £10 means I can buy 3 pints of beer and makes me happy)

In reply to Trevers:


Ok, but if we have money, let's call our currency Summos, and I buy a boar from MG, what differentiates our summos from a credit note?

In reply to Shani:


I'm concerned about your intentions for this boar!

In reply to Donald82:


it would seem Corbyn got stuck into a real one for spell in the 80s.

In reply to Shani:


Life or economies don't run quite so smoothly though.

Year 1; MG has bad season and shoots no wild boars, he borrowed enough summos from the bank of UKC to buy your apples in the Autumn and all is well. But, next year, MG needs to shoot 1 extra boar to clear the debt, plus 1/2 boar for the interest. Plus another 1 for exchange with your apples.

Year 2; It's another poor year, he only shoots 1. Does he exchange and roll his debt over (becoming 3.5 summos to repay the following year), or should the bank force closure as he is a liability, as it thinks endless loans won't improve the hunting and for MG to exchange a boar for apples and to clear their debt with the bank, he needs to get 4.5 boar the following year and past performance suggests his chances are slim.

Clearly loans can provide a good short term stop gap, a boost. But, there comes a point when the loan is so vast repayment is simply beyond the realms of possibility. A bit like your argument for Greece, that it simply can't afford to clear it's books. I say it could but it may take 10-20years and that's what they should have pushed for. Better late than never.

If the UK pushes it's loans up over the £2trillion mark, perhaps with Corbynomics before he gets any growth / an annual surplus etc.. it could be nearer £3trillion. How long would it take to repay it, how much has been spent servicing that debt annually? It is quite possible to spend more servicing the debt in the intervening years, than any financial gain from spending it. The UK currently spends £50billion servicing debt annually. If you count the past 5 years, then perhaps the next 15 years of a slow debt repayment plan, that's a £1 trillion spent on interest alone. You would need some serious corbyn growth to justifying paying even more in interest.

Look at some of the construction projects in Spain, unused airports etc.. they generated employment, but they haven't repaid their initial cost. Dead or wasted money.

In reply to summo:

Ok Summo - you've noticed another important property of money; along with a degree of scarcity (yes, this even applies to the dollar), it also has to have some element of persistence. As boar and the apples have a limited shelf life, we need a way to capture their value longitudinally in a 'token currency'.

This also ties in to another important property of money (and what differentiates our 'summos' currency from a credit note); the exchange of money has to be a 'means of final settlement'.

There is still one further and VERY important property of money that we have not identified, but what I want to know is, how do we create our summos? How do we get our currency off the ground to give MG a loan during the bad season when he shoots no wild boars?

In reply to Shani:

Why not just make the, no doubt brilliant, point you've been tediously lumbering towards?

In reply to Sir Chasm:

I think he's trying to say money is created by government and "deleted" by taxation

In reply to MG:

Maybe, if he took his head out of his backside he could tell us and we could all applaud.

In reply to Sir Chasm:


I am trying to get people to think about what money is and isn't. We all think we know what money is, but it can be tricky to define and hard to understand.

I am trying to arrange my thoughts around this discussion as much as others are. It is useful to understand the properties of money. If you can understand what a currency is, there is nothing to stop you creating your own (and people do - from crypto currencies like bitcoin to local currencies such as Anacostia Hours - in fact alternative currencies have flourished since the start of the economic crisis.)

Understanding money also stops you ruining existing currencies and guides you as to what you can and can't do.

So how do we get our new currency off the ground?

In reply to Shani:

I don't believe you.

But, for argument's sake, please explain why we need a new currency.

In reply to The Thread:

If anyone wants to read a book that explains how an economy works in an illustrated , humorous and basic way that is designed for laymen then I suggest buying this, rather than trying to decipher this thread.

http://www.amazon.co.uk/dp/B003HOXLVQ/ref=rdr_kindle_ext_tmb

In reply to Shani:



The bank of UKC needs to own some assets to the value of the Summo's it creates, or a given percentage of leverage? Can't make money out of thin air? Which implies either the bank owns assets, or people save their existing summo's with them, but they don't exist (chicken and egg?). The government doesn't need to exist or be involved.

In reply to summo:


So what is the 'asset' owned by bitcoin?

In reply to Shani:


Owned by some rather clever scam artists. Backed up by nothing and could collapse tomorrow, with nothing any bitcoin owner or financial authority could do to save or help those who were robbed.

In reply to summo:


You think it is owned by 'some rather clever scam artists'? That pound in your pocket and those notes in your wallet, who owns them? You? The government? The bank of England?

Why is bitcoin any more or less of a scam than the paper in your wallet or the metal in your pocket?

In reply to Shani:

Gold is the only true currency, everything else is just credit

In reply to Bjartur i Sumarhus:


Do you use a currency? If so, which one?

In reply to Shani:



The pound in your pocket is fiat and a promise to pay the holder that sum backed by a tax collecting government that also controls the police and army. Therefore there is a high chance someone else will accept its value of one pound. The other is backed by a adult male who is in his childhood bedroom in his parents house with Tube8 and silkroad on the other tabs of his search engine and a bin full of scrunched up kleenex, you can only spend it with likeminded individuals and will struggle in Tescos.

In reply to Shani:
I use British pounds as that's what I get paid in and it's also the currency I need to use to pay my taxes.As a means of exchange I find it works pretty well, my wife even more so

I could buy a bitcoin with £150. But I would only do that in the hope that it would go back to £750 like it was on 2014 and then try to sell it. I suspect that is a common reason for bitcoin ownership.

In reply to Shani:
it doesn't actually matter who owns, their value is pretty stabile and I can exchange them for goods, services or other currencies. If I save my money, then up to a limit even in a banking collapse the BoE will guarantee my savings, if I saved lots then I could open multiple accounts to protect all my money. Can bitcoin protect any single coin?

Who owns bitcoin? Who started it? Who holds the most? etc... If it's not public knowledge, then perhaps there is a reason why?


-bit coins can be lost, or destroyed. As they are solely electronic due to drive crashes, corrupted data, viruses
- valuations fluctuates wildly, it's not stabile at all. It's ranged from $1 to $500 before in a 3 yr span.
-no buyer protection, unless you go through 2nd parties, like clearcoin using escrow services, but then it's just like normal money, so why bother?
- Built in deflation, it's capped at 21million coins, it's more akin to a pyramid scheme, where the early adopters profit hugely and the person who buys the last mined coin suffers.
- It's lack of physical form is a disadvantage. It is purely web based and the currency holds no intrinsic value, so their is limited trust.
-GHash.io a collective of coin owners/miners that are assuming control of the currency, currently at 42%, who are they? Why are they after control?

In reply to Bjartur i Sumarhus:

So gold isn't the only true currency - although it is the one that we probably both use to placate our respective wives!


The thing is, bitcoin isn't the only currency to experience volatility is it? Just recently look at Russia and China. What about the history of Sterling from the 1970s inflation problem or ERM debacle? Also consider the life of the Real (or most other South American and Asian currency crises). Currencies go through periods of volatility.

Back to bitcoin, Dell accept bitcoins via processing partners (so the bitcoin is resolved in to sterling/dollars etc...). But the model makes money (!) for those partners and bitcoin satisfies the properties of money outlined above.

Barclays along with other major banks are looking at accepting it, but no one is quite sure 'how it is money', its legality, how to tax it etc... Hence my points above about establishing 'what is money' and the question of how do you start up a new currency.

We know that the cash in your pocket is just paper and we know that bitcoin is just 0s and 1s. We know that currencies can be volatile. We know that there *aren't necessarily physical assets behind all currencies.

*Edit: to correct "are" to "aren't"

In reply to Bjartur i Sumarhus:



it's a scam, it's released or mined as the next generation of IT nerds or geek come along. They claim the release is roughly the rate at which gold is mined, but I suspect it's more related to "one born every day..".

Even the fact they call it mining as it probably appeals to gamers, rather than simple creating money out of thin air and calling it a release.

In reply to summo:

Yes. Using the blockchain. There have been some bugs, but the principle of the blockchain is going to have a massive implication for online security and transactional integrity.


Same as who 'owns' any money; those that hold it.


The pound in your pocket can be lost or destroyed.


And yet you are clearly familiar with the Weimar Republic....so this problem is not unique to bitcoin is it?



Now we get to the rub. Is capping bitcoin at 21m a problem? You were the person attacking the printing of money in QE. So actually it would seem you now contradict what you initially approved of.


Most money is not physical. It only exists in electronic form. Does any currency hold intrinsic value in perpetuity? Consider back to the Weimar republic....


Investors. Are their actions any more dubious than the massive currency trades and bets made by George Soros?

In reply to Shani:

so far bitcoin has range from $1 to peak spike of $1000 dollars in less than 5 years. Name any volatile currency that even comes close?

it's just an overly complex and nerdy way of paying for something. It's like putting money in paypal, then spending hours trying to find someone who takes paypal as payment, rather than using real money.


It isn't money, it's a virtual credit note, that isn't backed up by any governing body or legislation. I would be worried if banks start touching it.

In reply to Shani:

Some bugs, the whole online system of storage, without any oversight, legislation, governing bodies is just fraught with problems and potential for disaster, of which there have already been some.

A bank in a country can issue funds. Who own bitcoin, who started the first release? How much do they hold, how much could they have made? It's a scam.

It's up to me to look after it. Which is much easier physical money, or currency which have an intrinsic value.

Germany after WW1 and bitcoin hardly comparable or even connected in any fashion.

Creating a fantasy currency in IT land, and a bank creating money that has to be paid back are two very different things.

It is backed up by a assets and wealth of a nation or bank. What is behind bitcoin?

They are public and accountable, now more than ever. Who are Satoshi Nakamoto and Martti Malmi? How accountable are they?

In reply to Shani:

The gold quip was really to demonstrate that the physical nature of money is and has been historically important. So even though a pound is just a promise, it is still represented by a metal coin which (is meant to be) hard to forge. Likewise notes.

Bitcoin is hard to quantify as the terminology and understanding required to "get it" is beyond the bulk of the population. And if there is anything on this earth that people have a good reason to be suspicious about...it's money, people promising new methods of currency for you in exchange for your pounds will always expect others to do their due diligence to check they are not about to be robbed. One look at the Botcoin wiki page will tell you why 99.9% of the population will resist this cryptocurrency. It's mumbo jumbo (examples below). Try explaining it to your mum ..then it will become obvious why its life will live in the shadows for our lifetimes (IMO)

"The block chain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: maintenance of the block chain is performed by a network of communicating nodes running bitcoin software"
" a payer must digitally sign the transaction using the corresponding private key. Without knowledge of the private key, the transaction cannot be signed and bitcoins cannot be spent."
"A transaction must have one or more inputs. For the transaction to be valid, every input must be an unspent output of a previous transaction. Every input must be digitally signed. The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. "
"Miners keep the block chain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. A new block contains information that "chains" it to the previous block thus giving the block chain its name. It is a cryptographic hash of the previous block, using the SHA-256 hashing algorithm."
"Every 2016 blocks (approximately 14 days), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.[9]:ch. 8 For example, between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion."

In reply to summo:


You have storage issues with any currency. Many a note has been burned. Many a hoard of treasure has been lost. You'd need to mention WHY bitcoin requires oversight and legislation and WHAT problems oversight and legislation is required to solve. One presumes that gold never had any oversight and legislation. Again this brings us back to what money actually is.


A bank can issues funds - but how does it do this? How can it increase money supply without damaging the value of what is already in circulation. For bitcoin, Satoshi Nakamoto started the release.


Depends how much you have. Even then, the value can alter without your control. Great Depression anyone?


Most money only exists electronically. Fact.


There IS something behind bitcoin. What happened to the dollar during the Great Depression? And yet weren't there assets behind the dollar?


You don't understand the blockchain. Or if you did, you would understand where the value comes with bitcoin and who is accountable.

In reply to Bjartur i Sumarhus:

If I was to explain it to my mum I'd drop the details of HOW bitcoin's blockchain works and explain WHAT it is.

In reply to Shani:
and if your mum was cautious about her pounds in her pocket and was naturally curious, she would start asking questions and before you know it you're up to your neck talking about block chains, mines, hashes,nodes and nonces. Then you will probably lose her interest.

My main point is, that regardless whether bitcoin "works" or not. I think we are a million miles away from it's acceptance withing the general populace...mainly because it is so hard to comprehend how it functions.

In reply to Shani:


even in the crashes the currency fluctuation are minimal compared to bitcoin. If you drew it on the same graph/scale etc.... you would not even notice the dollar fluctuations.

Same old mantra from you again, when you can't argue a point, you claim others don't understand something as well as you! But, then fail to expand your answer.

In the bitcoin scam, they try to claim that the value is it's 'usefulness or benefits' , not the price. But, price is what determines what can be bought with it. I think I understand the system of blockchains, peer2peer, multiple wallets, public keys etc.. pretty well and it's ripe for corruption by clever programmers, hackers, or even the originators.

There have been bitcoin Ponzi schemes, bitcoins hacked/stolen, Mt. Gox Co. Ltd, a Bitcoinica founder Zhou Tong steal funds, bitdefender was hacked and ransom demanded... I could go on and on.. it's as insecure as any bank, but without any back up.

In reply to Bjartur i Sumarhus:


she'd be more interested in apples and wild boars though.

In reply to Bjartur i Sumarhus:


I am a software developer so she has heard me going on about such stuff for years....and yes she does lose interest!

But then MOST people don't have any interest in money - other than how to get it. No one really cares WHAT it is - just what it can do for us as a means to procurement.

In reply to Bjartur i Sumarhus:


Well, there is a multimillion dollar global economy out there right now that is growing exponentially and exists (or rather its growth) is being driven largely because of bitcoin and the anonymity it provides (which will be further secured by obfuscation through CoinJoin and similar innovations).

This economy exists on a market that works beyond state taxation, has massive customer satisfaction, is highly secure (and becoming more so), and can deliver pretty much anything a consumer could desire. Within a decade most of us will be using this platform and this market in some form.

All you need is TOR.

In reply to summo:


You don't understand the blockchain as evidenced by your questions.


Just as money can be printed by forgers, credit cards can be copied, banks can be robbed with a gun. This is WHY the blockchain is going to transform commerce and why prime movers like bitcoin are at an advantage.


So when the dollar crashed in Great Depression, what was the 'back up'?

(And a Ponzi scheme has NOTHING to do with the integrity of Bitcoin)

In reply to Shani:


it's a game of one upmanship, between software producers and hackers, a continuous race with no end. You should know that if anyone does.

Highly secure, when compared to put your money on the mantle piece and the front door open. Banks are not much better, but if a bank is hacked etc.. then it has to honour it's savers.

In reply to Shani:
if you are robbed via banking hackers etc.. then banks reimburse you. Bitcoin?

why did it require a back up, it didn't disappear? It didn't even lose value anything like the bitcoin fluctuates. Aren't recessions just resets for too much growth in a capitalist economy?

Admit it, you've got bitcoins haven't you?

In reply to summo:

Yes - which is why the blockchain is so transformational. You'd have to hack EVERYONE's computer to corrupt the blockchain.


Think about this. If I robbed a bank and got away with £50m, the bank prints off another £50m, to reimburse savers.

But what happens to that value of that £50m? You've now effectively "QE'd" £50m. So although the savers got their £50m back, it is not worth the same amount in value as it was before! What has actually happened is that everyone has paid the price of the theft; the loss is shared out (unless the stolen £50m is recovered and destroyed).

In reply to summo:

In reply to summo:



One thing I want to clear up. Banks do not loan out based upon savings. Nor is the loan necessarily guaranteed by a bank's assets. Evidence of this can be seen with the run on Lehman's and Northern Rock.

To take this thread back to QE and Corbynomics, if money is 'created out of thin air' to build an asset - such as a road, power station or social housing stock, doesn't this satisfy your demand that an asset lies behind the loan?

In reply to Shani:

"Think about this. If I robbed a bank and got away with £50m, the bank prints off another £50m, to reimburse savers."

I don't think so. Did the banks "just print" the money to pay the LIBOR fines? of course not. The reimbursement would come from insurance claim or taken from another area of the bank with a surplus cash balance.

In reply to Shani:


no it doesn't, it's paid from potential profits. The shareholders pay for the bank's incompetence.

In reply to summo:

But if the savers who endured the theft are reimbursed there is now an extra £50m quid in circulation - this reimbursement plus the £50m sitting in the back of a transit van somewhere. The shareprice may be affected but that doesn't stop the increase in money supply.

In reply to Shani:


Of course, it is but a fraction, but it is regulated, through the Liquidity and leverages Act. Which increased in recent years.


Nope, because that asset might not produce enough value to replace what is spent, plus the interest on the loan. Spanish airports for example. A power station is probably different, being critical national infrastructure and on a scale that no small private company could ever consider. Housing could be private, but there are little or no incentives for private companies to build affordable housing and so many get out clauses for them at present.

In reply to Shani:


There is no increase in supply, it came from bank profits that would have been paid to shareholders, staff bonuses etc.., who could have saved or spent their dividends/bonus. Ownership has changed, but no new money.

In reply to summo:


This argument could be made for any asset for which a loan is made. Housing markets go up and down. So a PQE for a power station would be agreeable to you?

In reply to Shani:


Summo is correct, this would not create a "new" £50m to replenish the savers. The money would come from an existing pool, not created out of thin air...either from the bank itself or from an insurance claim (for robbery) and the shareholders of the bank or insurance company would suffer the loss. No new money in circulation in this example

In reply to Bjartur i Sumarhus:


I will concede that. Which still leaves the question of how is money created?

In reply to Shani:


No. Standard borrowing, a straight loan for critical infrastructure. For important national assets, there should not be no direct involvement of overseas nations, especially those beyond the EU. You repay the loan, with interest, nothing else. The problem is the UK (apart from being skint) is short of engineers in many areas, that are needed to both design and build such power stations, so the UK has little choice, but to go overseas. My OU physics lecturer was involved the development of hinkley and oldbury, he literally said that people like him in the UK were a dying breed and this was in the late 90s.

Now if it wanted someone to write the history of power stations and discuss their geography, perhaps a book, followed by movie and a play. With some media and marketing work. Then a follow up where some psychologists discuss the impact.. the UK must be over flowing with degree qualified people just itching for such work.

In reply to Shani:
How is money created?

Fractional reserve banking (I assumed this had been covered already but I haven't read the whole thread)

Edit : interesting etymology subnote - Bankrupt comes from the Italian "Banca rotta" meaning "broken bench". This was when a money lenders bench was broken when he had too many depositors asking for their money back..a bank run. These Italians used a method called Lombard banking (circa 15th-16th century) which was a bit like a pawn shop...and is how Lombard Street in the City of London got it's name.

In reply to summo:


"For important national assets, there should not be no direct involvement of overseas nations" - double negative - are you saying we SHOULD borrow from overseas nations?

In reply to Bjartur i Sumarhus:



And how is the money supply increased?

In reply to Shani:

For important national assets, there should be no direct involvement of overseas nations.

My typo, no control or stake from overseas.

In reply to Shani:


Sorry for the link, but I have to dash home now..will come back later on

https://en.wikipedia.org/wiki/Fractional-reserve_banking

In reply to summo:

I never understand this argument. It is like saying that everyone must drive Leyland or Austin Rover instead of the reliable VW or aspirational BMW and we should all eat tripe and jellied eels because they are traditional Great British foods.

I mean - it isn't as if the Chinese are going to get the humph, pack up their nuclear power station and take it home is it? Why shouldn't national assets be funded by overseas investment? We fund overseas railways in our rail franchise agreements!

In reply to Bjartur i Sumarhus:



Not read this. But he's an Austrian economist with a consistent record of being wrong.

In reply to ByEek:


Because if you are going to spend that kind of money you should try and benefit as many businesses in your own country as possible. The kind of cost involved here, there would be a big knock on effect. Instead you give the interest payments on the loan to china, then the profit from construction goes to France and China. The UK gets the electricity and nothing else. A terrible deal overall, but it's better than no power stations and light out.

The UK funding overseas is great, it's a net UK gain, but completely wasted, if it goes the other way elsewhere.

In reply to Donald82:

It's a book written to explain how an economy works and functions. That authors ability to do that in an educational way is not impacted by his inability to predict the future. The UK lefts favourite Keynesian Paul Krugman is often wrong yet it doesn't mean he can't write a factual book designed for teenage children about how an economy works.

In reply to summo:


Welcome to the real world. So are you suggesting we should only buy British cars? Like Honda, Nissan and Toyota cars right? Built in Britain by British workers, supplied by British businesses? What if I want a smart phone? We don't make those in the UK, but we do write apps for them. So I can have the app, but not the phone?

Is there a company or organisation in the UK that can build a nuclear power station? It is just a silly argument. The UK excels at some things and outsources others. There is nothing inherently wrong with outsourcing big projects in my view. We get the benefit of "the thing" and in return someone gets some money. Isn't that how the supply of goods and services works? So what if China get interest payments.

In reply to ByEek:
welcome to the real world indeed. So when you sit in the pub and complain there aren't any proper jobs anymore, no apprenticeships, jobless degree qualified people, Britain does not make anything any more, the UK trade deficit grows and grows, foreign companies control everything...

Take a look at your car, the labels in your clothes, the food in the fridge, everything you own, your mountaineering kit ...

Then try and connect the two.

Yes, the UK gets the benefit of The Thing, but if it does not sell enough other things to fund it, it's economy isn't sustainable.

In reply to Bjartur i Sumarhus:

It's not him that can't predict the future it's his model of how the economy works. For example, he thinks expanding the money supply is the same thing as inflation. Generally, Austrian economics is just nonsense. If his book's based on that then it will be too.

In reply to Donald82:
"He thinks expanding the money supply is the same thing as inflation"

Does he? Can you elaborate because it sounds like you just parroting a basic criticism of Austrian school without looking into it a bit further? I think the belief is that if money supply is expanded with a shortage of output, then the increase is faster than the rate of GDP increase. Therefore if the money supply is increased by X% and real GDP remains constant, then you should expect inflation to rise by X%. That is not the same as saying expanding money supply is the same thing as inflation. But happy to be corrected, it's not an exact science.

In reply to Donald82:

BTW, do you have any other book reviews of books you haven't read

In reply to Bjartur i Sumarhus:

What you've written is what I'm talking about and is wrong.

In reply to Bjartur i Sumarhus:

Read a (positive) review of the book just now. Propaganda is probably the best word for it.

In reply to summo:

But I don't sit in the pub complaining about those things because from where I sit, what you have said just isn't true. From a historical perspective, we have never manufactured more goods... EVER!!!

The simple fact is that were it once took 200 dock workers a couple of weeks to unload and load a ship, it now takes a dozen or so people a few hours. The idea that manufacturing employs the masses is long gone. In its place we have high paying high value jobs for people who design, invent and engineer. Yes, there is a problem for the semi skilled and low skilled I agree, but there are not a shortage of jobs if you have the skills. It doesn't bother me that you can't buy British made stuff any more than it doesn't bother me that when I can't be arsed to cook, I outsource that job to a restaurant or takeaway.

And if you don't believe me when I say we manufacture a lot, have a look at one of Top Gear's better films
youtube.com/watch?v=vmcmqTAu6b8&

The faster we get over the fact that people in this country are not prepared to work for peanuts as they once did and move on, the faster we can start competing in the global market - because that is what is going on around us.

In reply to ByEek:

I'm alright jack?

You might have missed one point, your global trading market, is also global employment market, so there will always be someone somewhere willing to build something or work for less than the average UK worker.

I do agree UK wages could be higher, but then everyone needs to be prepared to pay more and buy British to support the UK work force.

In reply to summo:


But why would I pay more to buy something I can buy from elsewhere for less? And I am not alone. Most people shop on price. And not because they are devoid of morals but simply because they can't afford to pay more. And what is a British product anyway? So you stump up the cash and buy a Land Rover, described by my 5 year old son as "A good British car", assembled in Solihull, but owned by the Indian consortium Tata Motors... which my pension fund may well be invested in. I imagine many components are manufactured locally, but similarly, others will be imported. So should I buy a Land Rover by your rules?

And satellite TV - a British staple these days. The UK manufactures satellites and other space technology. But we don't have a space programme. We outsource the launching of our satellites to other countries. By your thinking a most unpatriotic thing to do as we should be launching our own rockets no? Presumably we shouldn't consume satellite TV?

The idea that we can or should only buy British is long gone. What does "Made in UK" actually mean anyway? Time to put your rose tinted glasses away I'm afraid.

In reply to ByEek:

Obviously, there is difference between UK made, UK assembled, or simply a complete product imported.
As you say you are not alone, I just think it is very short sighted, especially when it comes to the government spending on massive projects.

Ps. The UK space industry is proportionally bigger than anyone elses in Europe. It may not launch them, but it certainly does more in development. If only the same could be said for the nuclear industry, then UK would not be paying France and China to solve its power problems.

In reply to ByEek:

Upto a point, yes you are right. But then you have to look at strategic interests. Is it in the UK's long term interest to retain/have skills in certain areas?This is where the likes of France/Germany and others take a different view. So to go back to nuclear power, is there long term benefit to doing this as much as possible in the UK? Whats is the cost of that etc etc.

Not easy. Classic example at the moment is the USA buys most of its rocket engines from Russia.Now they have decided its not a good idea so are trying to catch up.Thye lost the skills as it was cheaper to buy Russian technology.

In reply to summo:


But this is the nub of it. Whilst we are importing skill like nuclear power, we are exporting skills like space, motoring and more besides. No doubt the French are sitting in their cafes bemoaning the fact that they have to use British made satellites in order to watch their favourite team (Manchester United) play football. Swings and roundabouts.

In reply to summo:

Worst thing is, there's a fair chance that the nuclear plant we're building will be super-ceded by cheaper, cleaner, quicker-to-build technology not long after it's built.

In reply to Donald82:


There is ? pray tell

In reply to ByEek:

But, perhaps everything could be British made(or at least much more), the 2 million or so unemployed have spent how many years in UK education? At least 11 years, some 13, or even 16/17years. Perhaps they could be producing something beneficial for the country too? There must be some wasted talent there.

Why can't the UK be all swings? If the UK can build satellites and the like, or at least major components, F1/high end car industry is UK dominated... UK's cerne input is big too.. then perhaps it should have been developing it's telecoms, IT hardware, nuclear industry as well.. and if people in the UK had some national loyalty (apart from hopelessly following the England team), rather than always chasing the cheapest price.. the economy as a whole would be a little better?

I don't think who makes your car is half as important as the nuclear power station, some things just scream importance, for so many reasons.

In reply to Donald82:


you mean the fact that we've been 10 years from fusion power for the past 40 years?

In reply to neilh:

There is no reason why in 20 years time, with the right development, the UK could not be producing the leanest meanest safest reactors in the world, selling them globally as the big bad coal/oil/gas is even more frowned upon by future generations.

It's a question of if the UK wants to be dependant on others for something that is essential to daily life. It could also do the same with renewables, but it needs to move fast, the longer it leaves these avenues marginally funded, the harder it will ever be to get them going again in the future or attract talent from overseas.

In reply to summo:

Well as there is a recognised shortage of engineers it would take a generation even to get on the starting blocks. By then things will have moved on anyway.

In reply to neilh:

So, no point even bothering then? Or try and plug the gap, inspire the youth now before all the mature engineers die and no one can teach them? My uncle is 71 and still in demand to do electrical installation repairs etc. at sellafield and other places, it just can't be right that there are no people out there younger than him able to do the job. Little hope for the future?

In reply to summo:

batteries (including in cars) plus renewables and/or better nuclear (not fusion)

In reply to GrahamD:

see ^^^

In reply to Donald82:

So in summary, run the country on batteries and windmills and hope someone invents a different way of delivering better fission ? I think on balance I'd rather have a few GW baseload in hand while we wait.

In reply to Donald82:


If you switch all transport to electric, then the power demands rocket up, as the renewables aren't delivering anything close to even normal night time consumption, I think you somewhat underestimate the requirements.

Micro fusion, within 50years, a plant in every large town, several in the big city. Many forms of transport will them too. Fusion is probably closer than the battery tech you dream of. Why have dirty dangerous fission, when you can have fusion?

The biggest thing holding any of this back is the anti climate change lobby, oil firms and the generally low oil price. No doubt the Paris climate talks will just be more hot air. The VW farce won't help either.

In reply to summo:

Unless there is a drastic change in the UK's desire to take this on, then no. There are plenty of organisations trying to get a change of thinking, ranging from Dyson, the QE prize for engineering, MAS( do you know who MAS ios by the way) etc.Its even well recognised now that one of the best paid jobs for graduates is engineering in the UK, yet society as a whole is just not interested."You can take a horse to water, but you cannot make them drink". Do not get me started on how the education system "disses" engineering over things like drama. Its scandalous.

In reply to neilh:

Manufacturing Advisory Service, multi agent systems or Malaysian airlines?

There are other projects, the current team attempting the land speed record has a schools project too. Some of the tech development there is pretty amazing and UK led. But, sadly the UK leads niches now, not whole broad fields. There should be more projects linked with schools, but the time kids get to Uni age it's too late.

Tomorrow our kids school is visited by one of the few Swedish astronauts, doing different things with different age groups, pretty lucky really for a small school in the middle of no where. After school I'm taking the kids to the local Uni where there are free presentations with him and an American (mike fincke), Russian(oleg kotov) and a Romanian(staffan Carius) astronaut on different subjects like future space vehicles, next human destinations, the next space station... all free. If only there were more projects like this on different fields, more often.

I think the society isn't interested, because there are a lack of role models, it's all about talent or lack of shows, everyone can make it big at something, without actually grafting etc.. or so they seem to think.

In reply to summo:

Although I do have a hang up about engineering in schools being poor, I also recognise that the creative industries are huge in this country ( probably add more to gdp than manufacturing). So whilst we moan about it, in all honesty, the fact is the Uk is brilliant at engineering niches. There is no point in harking back to a different age, its a waste of time.

In reply to neilh:


How do you spot the truly gifted creative engineers that represented 1 in a 1000, if you aren't training potentially 1000s of engineers in the first place? The same with all the other fields.

It's not about harking back, it's about the filling the fields that the UK is being left behind in?