The economic consequences of Mr. Osborne

[The excited one]

For you all TWC members i know that this forum is a-bit right oriented (even i myself a libertarian) but ! there is an article that interested me and i want to share it to you and see what do you think about it......

http://www.primeeconomics.org/wp-con...Mr_Osborne.pdf

(i think is pretty damn good to read and i expect lots of people screaming too)

and yeah you can do criticisms on this article but no trolling around.... and no flame wars too.....

[Mr. Scott]

Errr Right-wing oriented?

Maybe in recent months (due to the growing number of Americans ), but for the most part I've noticed a more leftist and socialist trend.

The only problem I find with Keynes is that it seems to go under the assumption that all industries should be growing all the time, when this clearly isn't right. Some industries/companies should fail. I mean, do we still want to have textile mills being sprouted alongside every household (exaggerated analogy of course)?
Like take the housing market here in the US. The Fed seems to think that its goal should be to have prices move upward again. But what if the market forces do not wish that to be so? Maybe the equilibrium for the housing market is at a lower price? By trying to fight it, the Fed will just exacerbate and delay an inevitable correction.

Keynes policy fails because the government does not have the knowledge to see which industries/companies should succeed or fail. Often they'll aid a sector that should never have developed so extensively in the first place.

[Prosaic Visitant]

Errr Right-wing oriented?

Maybe in recent months (due to the growing number of Americans ), but for the most part I've noticed a more leftist and socialist trend.

I was about to say, the TWC scene is, on average, slightly left wing. Check the Political Profile thread if you don't believe me, ex' o'.

[removeduser_4536284751384]

Keynes policy fails because the government does not have the knowledge to see which industries/companies should succeed or fail. Often they'll aid a sector that should never have developed so extensively in the first place.

That said, you can hardly deny that a major part of this financial crisis has been bankers improperly using money and losing it. We like to believe that on the free market few bankers would take too great a risk for too low a return, but we've seen exactly that happening over and over again by the vast majority of banks worldwide up until 2008 or so. Too many banks risking too much of their money for too low a return. How and why could that even happen? Not only that, but we've also seen managers in private companies actually engaging in corruption at the expense of their company, ignored by completely oblivious superiors, shareholders and government auditors. And we thought that was impossible?

I a more realistic note, many companies have moved their manufacturing to Singapore and Hong Kong, in part due to good labor laws and law taxes, compared to the US and EU.

No. That's nonsense. They've moved to Singapore because the labour they need isn't available in the Western World.

[Menelik_I]

That said, you can hardly deny that a major part of this financial crisis has been bankers improperly using other people's money and losing it. We like to believe that on the free market no banker would take too great a risk for too low a return, but we've seen exactly that happening over and over again worldwide up until 2008 or so. Not only that, but we've also seen managers in private companies actually engaging in corruption at the expense of their company, ignored by completely oblivious superiors, shareholders and government auditors. And we thought that was impossible?

One of the problem is that Banks are currently under an implicit and practical guaranty by the taxpayers.
Also an aspect we cannot forget about 2008, is that the FED have been encouraging the housing bubble as a substitute of the DotCom bubble.

[removeduser_4536284751384]

One of the problem is that Banks are currently under an implicit and practical guaranty by the taxpayers.

They're also under scrutiny and control by the government that private investors somehow failed to provide. I'm just as astonished by the private investor's failure as you are. But I don't see government control as a problem at all. How else are we supposed to stop the self-destructive insanity that's occured over the last decade?

Also an aspect we cannot forget about 2008, is that the FED have been encouraging the housing bubble as a substitute of the DotCom bubble.

More info please?

[Menelik_I]

They're also under scrutiny and control by the government that private investors somehow failed to provide. I'm just as astonished by the private investor's failure as you are. But I don't see government control as a problem at all. How else are we supposed to stop the self-destructive insanity that's occured over the last decade?

Change corporate as to make managers personally responsible per contract for catastrophic loses and gross corruption.

Drag them in court and lock them up in jail till they pay back, it might work to deter others.

ETA:

On this note, it is interesting that the GM Bond and debt holders were shafted during the Auto-baillout and received a massive haircut in the favor of the labor unions. just a side note.

More info please?

First, the Federal Reserve’s
expansionary monetary policy supplied the means for unsustainable
housing prices and unsustainable mortgage financing. Elsewhere
(White 2008) I have discussed the growth in regulatory mandates
and subsidies that exaggerated the demand for riskier mortgages,
most importantly the implicit guarantees to Fannie Mae and Freddie
Mac that combined with HUD’s imposition of “affordable housing”mandates on Fannie and Freddie to accelerate the creation of a
market for securitized subprime mortgages

In the recession of 2001, the Federal Reserve System under
Chairman Alan Greenspan began aggressively expanding the U.S.
money supply. Year-over-year growth in the M2 monetary aggregate
rose briefly above 10 percent, and remained above 8 percent entering
the second half of 2003. The expansion was accompanied by the Fed’s
repeatedly lowering its target for the federal funds (interbank
overnight) interest rate. The Fed funds rate began 2001 at 6.25 percent and ended the year at 1.75 percent. The Greenspan Fed reduced
the rate further in 2002 and 2003, pushing it in mid-2003 a record low
of 1 percent, where it stayed for a year

Currently rates are still at zero, difference is that now banks just aren't lending the money.

The whole paper is here and it is kind of technical, from the Cato Institute.

[Mr. Scott]

That said, you can hardly deny that a major part of this financial crisis has been bankers improperly using money and losing it. We like to believe that on the free market few bankers would take too great a risk for too low a return, but we've seen exactly that happening over and over again by the vast majority of banks worldwide up until 2008 or so. Too many banks risking too much of their money for too low a return. How and why could that even happen? Not only that, but we've also seen managers in private companies actually engaging in corruption at the expense of their company, ignored by completely oblivious superiors, shareholders and government auditors. And we thought that was impossible?

But this is a different issue entirely. This is not regarding any sort of stimulus, but rather the poor implementation of regulation (which was already really there, but just not enforced well). I am not against regulation when it is necessary. I don't think pure capitalism is good at all. What the US needs is a healthy balance.

It seems as though the US government regulates things that shouldn't be regulated (growing barriers to entry - although that can be attributed to lobbying) and then fails to regulate things that should (screwed up Triple A ratings on mortgage-backed securities)...

And, I'm no economist, but wasn't one major reason for the housing bubble also the very low Fed rate throughout the 2000's? I believe it was this same policy of low rates during the 1920's that was a major cause of the Great Depression (which then was exacerbated when the new Fed chairman decided to completely kill the bubble in a very harsh manner)

[Condottiere 40K]

Personally, it depends on the issue, which may shift as more facts are revealed.

[Menelik_I]

For you all TWC members i know that this forum is a-bit right oriented (even i myself a libertarian) but ! there is an article that interested me and i want to share it to you and see what do you think about it......

http://www.primeeconomics.org/wp-con...Mr_Osborne.pdf

(i think is pretty damn good to read and i expect lots of people screaming too)

and yeah you can do criticisms on this article but no trolling around.... and no flame wars too.....

This is a Keynesian critic of Osborn ...

You would be amused that the guys from the Adam Smith Institute actually want Osborne to be bolder and criticize him from a different angle.

1. Abolish the 50p tax rate. It doesn't bring in much extra money, and it's making high earners move abroad, which means they'll invest in jobs elsewhere.
2. Abolish the employer's NI contribution. Correctly seen as a tax on jobs, the employer’s NI contribution adds to the cost of hiring labour, increasing costs to business and reducing the number of viable jobs available.
3. Cut corporation tax to 15%. Britain’s corporation tax is set to fall throughout the course of this government, but this should be accelerated and deepened to undercut the rest of Europe and attract multinational investment.
4. Reverse the CGT hike. Inhibiting economic activity at a time like this is countereffective and disincentivizes investment. This would be a shot in the arm for firms and entrepreneurs finding it difficult to raise capital.

Also it seems to me that TWC is definitively Commie Utopian.

[Condottiere 40K]

There are very few winners in a race to the bottom.

Actually, what you want is to provide value to the tax payers, so that they're happy to pay the difference between their current rates, and somewhere else where the taxes are lower.

[Menelik_I]

There are very few winners in a race to the bottom.

Race to the bottom is a strawman.

Actually, what you want is to provide value to the tax payers, so that they're happy to pay the difference between their current rates, and somewhere else where the taxes are lower.

How can you expect them to ''provide more value to the tax payers'', if you assume them incapable of adjusting spending to tax revenue and prioritize ?

[Condottiere 40K]

Assuming Somalia offered a flat 10% income and corporation tax, would you move there?

[Menelik_I]

Assuming Somalia offered a flat 10% income and corporation tax, would you move there?

Kind of hard, since you are assuming a strawman.

I a more realistic note, many companies have moved their manufacturing to Singapore and Hong Kong, in part due to good labor laws and law taxes, compared to the US and EU.

In fact it is kind of ironic that many ''start up zones'' in the France depends on exemptions from tax and regulation that enables them to compete.

[justicar5]

Race to the bottom is a strawman.

so why is it happening every day? The CBI campaigning for lower wages and less rights in the UK to compete with Chinese and Indian labourers, who are competing with each other, the Indians are winning the low wage game atm, they have enough people living in slums, enough people kept desperate to work for the ever lowering wages.

[Menelik_I]

so why is it happening every day? The CBI campaigning for lower wages and less rights in the UK to compete with Chinese and Indian labourers, who are competing with each other, the Indians are winning the low wage game atm, they have enough people living in slums, enough people kept desperate to work for the ever lowering wages.

1- Nice strawman, the original question was about the race to the bottom ON TAX POLICY.

2- Western Workers voted themselves excess ''rights''. More jobs are lost to automation than to Indians or Chinese. Higher productivity counts more than low wages, Western productivity have been going down.

2- Wages in India or China aren't going down, in fact Multinationals sweatshops pay the highest wages in their respective third world countries, if you exclude public workers jobs.

[Denny Crane!]

But wouldn't a VAT tax code better represent the actual needs of people?
I mean, you don't know how many people I'll see driving nicer cars than my family, yet living in a low-income apartment.

at least a progressive sales tax would discourage wasteful spending.

Its just bad, bad for business, inefficient etc. etc. I don't really care about wasteful spending, people are entitled to make choices like living in a flat with a nice car as opposed to a house.

so why is it happening every day? The CBI campaigning for lower wages and less rights in the UK to compete with Chinese and Indian labourers, who are competing with each other, the Indians are winning the low wage game atm, they have enough people living in slums, enough people kept desperate to work for the ever lowering wages.

And what would comrade justicar suggest doing differently? Wages have been on a race to the bottom since the 70's for average joe and all the time we're losing business to the east.

[Rolling Thunder]

This is a Keynesian critic of Osborn ...

You would be amused that the guys from the Adam Smith Institute actually want Osborne to be bolder and criticize him from a different angle.

Personally, I'd go for cutting VAT altogether and consolidating taxation methods (i.e. reform) as opposed to cutting the 50P tax. Lower taxation on consumption will drive consumption faster than lowering taxation on saving, which is what the 50P tax will do.

Beyond that, it's a fairly agreeable set of statements.

[Denny Crane!]

VAT is such a burden on business as well as consumption it is the tax I despise the most. I'd support cutting it altogether and moving towards some other type of taxation.

[The excited one]

VAT is such a burden on business as well as consumption it is the tax I despise the most. I'd support cutting it altogether and moving towards some other type of taxation.

so true but what kind of tax to replace VAT then? capital gains?