Brexit and the waning days of the United Kingdom

[Sheilbh]

I think you're hung up on it because you use it in a particular and unique way

As I've said I disagree that an 18% deficit or any other deficit tells you anything about austerity in that state - I've explained my definition so I don't see how much I can add. No budget is austere, it may contain austerity measures that reduce certain types of spending or raises taxes, it may not. Those policies that that either reduce spending or raise taxes are what constitutes austerity.

Now either increased national debt leads to lowered credit ratings/higher interest paid on debt service, or it doesn't.  If you acknowledge it does, then to be "anti-austerity" means you either (a) are willing to sacrifice a future default for the sake of current consumption, or at (b) you are willing to sacrifice the ability of future generations to deficit spend in the event of an *actual* crisis.

First of all we've had lower credit ratings however we've not had higher interest paid on debt (except on a basis of quantity) in a number of developed economies despite their national debt increasing. In part that's because of monetary policy. One other aspect is that globally there is a shortage of safe assets and many developed governments - like the UK, US and Germany - are going ahead with austerity policies that is reducing the pool each time. So an effect of this is that in its latest round of QE (which was very small compared to previous) the BofE couldn't actually find enough sellers of gilts because they'd rather keep hold of that safe asset. So that part of your analysis has broken down. From my interpretation, as a believer in free markets, the markets offering money at 0.5% or negative yields is a sign they want you to take it and spend it. I think we should follow the information that we're getting rather than apply a model that hasn't fit for the last eight years.

So from that to go to your point b - I think that the reason why higher debt isn't leading to higher interest rates is because we're not yet out of the last crisis. In my view higher interest rates would be a good thing indicating a return to normalcy. In part I think the UK has exhausted monetary policy, I worry about the extended unorthodox monetary policy and I think it's time the state did its bit and fiscal policy played a role in boosting the economy rather than depending on central banks which has also led to us having a policy mix that leans very heaving on one leg. In addition as I say we are favouring monetary policy over fiscal policy to deliver a recovery. So your point can be reversed, I think more accurately given where rates are: why should future generations be unable to respond to a new crisis through monetary means like interest rate cuts which are normally a better way of dealing with relatively short-term recessions because we're spending a decade at 0.5% or lower and of unconventional policy? Facing a recession in the UK there's lots of talk of helicopter money - I would rather than continue to rely on unorthodox monetary policy to go back to old, safe, understandable fiscal policy.

Also as the IMF piece above says 'for countries with a strong track record, the benefit of debt reduction, in terms of insurance against a future fiscal crisis, turns out to be remarkably small, even at very high levels of debt to GDP. For example, moving from a debt ratio of 120 percent of GDP to 100 percent of GDP over a few years buys the country very little in terms of reduced crisis risk (Baldacci and others, 2011).­'

However my view anti-austerity in a general sense because I do think the state needs to be different than it is, it shouldn't have a structural deficit - which means austerity - and that any stimulus should be capital spending or short-term tax cuts. I say in a general sense because I am anti-austerity in the way it has been practiced in the last few years. As I say in my view there should have been fiscal stimulus at full capacity through to 2011 and maybe beyond.

As to point a I don't think a default is a plausible scenario in the UK, the US (save a political choice), Germany or Japan (or, outside the Eurozone, Italy). I don't think anything in the pricing of debt indicates a serious probability of default. There's no national debt figure which magically makes a default significantly more likely.

If you think the total national debt is irrelevant, then why stop at a few percentage points of increased spending?  Why not kick out the jams and throw a continuous Mardi Gras party?

It's not an end in itself. I agree with Minsky. Fiscal policy in my view serves two roles. One is to decide and fund the structural account of the state. I agree this bit should be balanced - but it's always going to be a point of contention what is 'structural' spending. So in my view in the West we're going to face increased cost of care for the elderly so I don't think the state will be as able to do as much as it did in the mid-twentieth century. Where I think the debate should be is over what sort of state we want given that and how to fund it.

Secondly it's got a role in economic policy more generally. So, supporting and promoting future economic growth through investment and infrastructure etc. That can also be part of stimulus measures as can short-term tax cuts which is the other economic policy bit of fiscal policy.

So I think you could actually increase short-term stimulus measures (and your deficit) while decreasing the structural deficit through austerity policies. Personally that's broadly what I support for the UK when we have the next budget statement in Autumn depending on what the economic data says about the post-Brexit economy. At the minute it's still really unclear data has been mixed but better than expected, indicators are pretty fucking awful

[Tamas]

I'm hung on the word austerity because I think it's ridiculous to describe a budget deficit of 18% of GDP as austere and I think for a person to state that they are "anti-austerity" is a ridiculous position to take.

Deficits greater than nominal growth increase national debt.  That's not a political position, or a fashion statement, it's basic math.  Now either increased national debt leads to lowered credit ratings/higher interest paid on debt service, or it doesn't.  If you acknowledge it does, then to be "anti-austerity" means you either (a) are willing to sacrifice a future default for the sake of current consumption, or at (b) you are willing to sacrifice the ability of future generations to deficit spend in the event of an *actual* crisis.

If you think the total national debt is irrelevant, then why stop at a few percentage points of increased spending?  Why not kick out the jams and throw a continuous Mardi Gras party?

[Martinus]

Average hourly earnings in NYC are 33.14 as opposed to 25.61 nationally.  About 30% higher.
Median rental costs for a 1 BR apartment in NYC are $3510 as opposed to $1120 nationally.  About 213% higher.
And there's the rub.

I disagree.  The high rental prices are a symptom of "the rub," they are not the rub themselves.  The rub lies in whatever is preventing the market from responding to high demand for 1 BR apartments with an increase in supply of 1 BR apartments.

So the rub is that space is finite? 

[Martinus]

The problem with entitlements is that once they are granted, it is extremely difficult to take them away and people are treating an attempt to do so as an extreme austerity.

For example, if you compare Poland and Greece by GDP (PPP) per capita, it is almost identical. But the unemployment benefit in Poland is below EUR 200 per month, whereas in Greece it is EUR 360 and increases by 10% per each additional family member, and that's after the austerity reductions enforced by the Troika.

So why are Greeks entitled to get almost twice as much as Poles, especially as their economy and budget is in a much worse shape? But any attempts to reduce that are viciously attacked by socialists.

[Josquius]

http://www.theguardian.com/politics/2016/aug/15/neil-kinnock-condemns-corbyn-for-silence-or-ignorance-over-brexit

Neil Kinnock condemns Corbyn for 'silence or ignorance' over Brexit
Former Labour chief suggests leader 'let Tory Brexiters run amok' as he endorses Owen Smith for party leadership
Lord Kinnock
Lord Kinnock says Labour could have made a 'passionate case' for remaining in the EU. Photograph: Graeme Robertson for the Guardian
Jessica Elgot
Monday 15 August 2016 12.00 BST Last modified on Monday 15 August 2016 18.53 BST
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The former Labour leader Neil Kinnock has accused Jeremy Corbyn of showing "ignorance, lack of concern, or willingness to let the Tory Brexiters run amok" after the EU referendum, as he endorsed Owen Smith for leadership of the party.

In an article for the Guardian, Lord Kinnock says Corbyn has "either been silent on this central issue or so soft voiced that no one has heard a word" and adds that he believes the poll result could have been different if a Labour leader had made a passionate case for remain.

"It seems that he just wants to leave it all to the Tories who haven't even got a government majority on the issue. That's not leadership," Kinnock wrote.

When it comes to Europe, Owen Smith beats Jeremy Corbyn hands down
Neil Kinnock
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The Labour Movement for Europe, a party affiliate chaired by Kinnock, nominated Smith, the MP Pontypridd, by a margin of 10 to 1 this weekend, although Corbyn was far ahead of his rival in nominations from constituency parties, leading Smith by 273 nominations to 51.

Sebastian Vogt, LME's national secretary, said its members viewed Smith as "the more genuinely pro-European candidate" and 81% backed him for the leadership.

Owen Smith MP speaking at a Labour leadership debate
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Owen Smith MP speaking at a Labour leadership debate in Gateshead on 11 August. Photograph: Ian Forsyth/Getty Images
Vogt said: "In the face of the biggest challenge facing our country in a generation it is vitally important that the Labour party continues to stand united in its proud internationalist tradition and does not let the Tories take us out of the European Union on this blank cheque they have given themselves."

Smith, a former shadow work and pensions secretary, has been keen to put clear water between him and Corbyn, his once Eurosceptic rival, over policy on Europe, promising a second referendum and telling a hustings on Thursday that the party should be "fighting harder" to halt a "hard Brexit".


Jeremy Corbyn: Tom Watson is talking nonsense – and he knows it
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Kinnock said he had long doubted Corbyn's commitment to the remain campaign. "He entered the referendum campaign late, took a holiday in June, and described his enthusiasm for staying in the EU as seven out of 10. Plainly, the party leader's commitment had neither clarity nor conviction – 10 events in six weeks was never going to be enough to mobilise potential support. On the most vital issue of this generation – the future national and international wellbeing of our country – the leader simply didn't show leadership."

Kinnock said Labour needed a leader who was "up to the task" of having a key role in shaping the UK's relations with the EU. Smith, he said, could play that role. "He is a socialist to the core, a dedicated and knowledgeable European reformer, a gutsy campaigner and negotiator with radical and credible policies."

Smith's politics have regularly been compared with those of Kinnock; each has characterised themselves as being on the "soft left" of the party, rejecting unilateralism and battling internal opponents.

On Monday evening Corbyn will hold a rally for black and ethnic minority supporters of his leadership campaign in his Islington constituency, alongside the shadow health secretary, Diane Abbott.

The Corbyn campaign has had a testing few days, with the Labour leader using an Observer interview to accuse his deputy, Tom Watson, of talking "nonsense" about far-left entryists in the party. He will mention the appeal court judgment saying that Labour's national executive committee did have the power to block new members from participating in the leadership ballot.

Judges and infiltrators in Labour's civil war
Letters: The judicial upholding of the rights and powers of the NEC, the party's highest elected body ought to be welcome to all Labour members
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That case will now not be heard by the supreme court, after the five new Labour members who brought the original crowd-funded case against the party decided they would end their legal fight. Christine Evangelou, Edward Leir, Hannah Fordham, Chris Granger and FM, a teenage member, had argued that the ruling was a breach of their contract with the party. Although the high court ruled in favour of them, Labour brought the case to the court of appeal, which overturned the decision.

More than £93,000 had been raised on the members' crowdfunding website, but Fordham wrote on Sunday that they had decided not to appeal directly to the UK's highest court, citing the costs involved. "This has been an odd, emotional rollercoaster of a week for us all," she wrote. "Unfortunately, given the costs involved in pursuing the case further ... we have taken the decision that this is where this particular legal case has to stop."

Yup.

[Sheilbh]

The problem with entitlements is that once they are granted, it is extremely difficult to take them away and people are treating an attempt to do so as an extreme austerity.

This is commonly said, but I don't think it's true. There's been huge amounts of entitlement reform across Europe over the last 20 years (both before and after the crisis). It is more true with entitlements that affect many people - for example most people are laissez faire about shafting the unemployed but taking away, or restructuring, child benefit which is more universal is far more controversial.

For example, if you compare Poland and Greece by GDP (PPP) per capita, it is almost identical. But the unemployment benefit in Poland is below EUR 200 per month, whereas in Greece it is EUR 360 and increases by 10% per each additional family member, and that's after the austerity reductions enforced by the Troika.

So why are Greeks entitled to get almost twice as much as Poles, especially as their economy and budget is in a much worse shape? But any attempts to reduce that are viciously attacked by socialists.

Well I mean cost of living matters. They have a more valuable currency and have to survive in Euros for example so that's part of it. So it could be partially like the UK and Germany. The UK has higher unemployment benefits than Germany because it's a more expensive country and you need more pounds to survive than you do Euros in Germany.

The other thing to bear in mind is that the majority of the Greek welfare state doesn't necessarily help most people. It's got a classic Southern European structure. So, for example, about 85% of the unemployed aren't eligible or have run out of unemployment benefit. For the young (52% unemployment), chances are they would never be eligible because they wouldn't have built up enough payments.

It's not how it's meant to work in theory but in practice that's why pensions are so high in Greece and other Southern European countries is that traditionally it would be the family's role rather than the state's. So Greek grandmas would help support their unemployed grandkids who wouldn't be eligible for benefits. It's why pension cuts have always been the most controversial is because they often cover not just the pensioner (as in the UK) but generations below too.

[grumbler]

So the rub is that space is finite? 

And that demand is infinite.  Could we get more trite?  Look up "the economic problem."  You would presumably be surprised to find that your notion is fundamental and not at all interesting.

[mongers]

I'm quite surprise the PM has headed off on a two week long holiday, just thirty days after assuming office.   

In the past, at times of national emergency, some politicians have all but worked themselves into an early grave or died in the traces. Or is Brexit not really a big deal requiring a lot of work?

[Admiral Yi]

I'm quite surprise the PM has headed off on a two week long holiday, just thirty days after assuming office.   

In the past, at times of national emergency, some politicians have all but worked themselves into an early grave or died in the traces. Or is Brexit not really a big deal requiring a lot of work?

It's not like the clock is ticking.

[Sheilbh]

I'm quite surprise the PM has headed off on a two week long holiday, just thirty days after assuming office.   

In the past, at times of national emergency, some politicians have all but worked themselves into an early grave or died in the traces. Or is Brexit not really a big deal requiring a lot of work?

It's not like the clock is ticking.

Yeah. Latest reports are that we won't activate article 50 until the second half of 2017 due to the French and German elections. And the last PM I can think of who worked himself into an early grave was Eden

We're not in a national emergency and the best solution right now is that old MacMillan saying: quiet, calm deliberation untangles every knot.

[mongers]

By accident I've just been listening to the soundtrack album to 'The Long Good Friday', which in addition to the music has some dialogue* from Bob Hoskins gangster character, two of which talk about Britain's new relation with Europe, Oh have times have now changed. 

* can't find any on-line transcript, ones early on and called "Ladies and Gentlemen" and the other is him famously tearing a strip of the mafia.

[Richard Hakluyt]

I'm quite surprise the PM has headed off on a two week long holiday, just thirty days after assuming office.   

In the past, at times of national emergency, some politicians have all but worked themselves into an early grave or died in the traces. Or is Brexit not really a big deal requiring a lot of work?

I'm delighted with her so far, she should take a third week to ensure that she returns to work thoroughly invigorated.

Of course there is the problem of Boris being in charge while she is away, "Cripes! This is fun, I wonder what happens if I press this red button thingy?".

[Josquius]

I'm quite surprise the PM has headed off on a two week long holiday, just thirty days after assuming office.   

In the past, at times of national emergency, some politicians have all but worked themselves into an early grave or died in the traces. Or is Brexit not really a big deal requiring a lot of work?

The economy is fucked.  They have said theyre going to fuck it up even more. The longer they leave things alone the better

[Tamas]

http://www.politico.eu/article/is-nigel-farage-applying-for-german-citizenship-brexit-consequences-ukip-europe/

[Sheilbh]

Theresa May has higher approval ratings than Jeremy Corbyn among Labour voters


And based on the current polls the Tories would have a majority of 132 and Labour and the Lib Dems would hit post-war lows