Increasing borrowing to reduce borrowing.

[MrSmith]

Two very different scenarios. In 2008-10 stimulus was applied to try and recover from a 6% fall in output.

 

Stimulus was applied well before 2008, it started in 2001 after the Dot Com bust and without that stimulus we wouldn't have had an expanding economy through the last decade, that stimulus resulted in the banking crisis, and people want even more stimulus to keep the illusion going.

So how long should we keep stimulating the economy in order to keep the illusion of growth going?

[I1L2T3]

Stimulus was applied well before 2008, it started in 2001 after the Dot Com bust and without that stimulus we wouldn't have had an expanding economy through the last decade, that stimulus resulted in the banking crisis, and people want even more stimulus to keep the illusion going.

So how long should we keep stimulating the economy in order to keep the illusion of growth going?

 

In the fairly unique situation we keep stimulating to avoid slipping into a depression. Quite simply we avoid the mistakes of the 1930s.

 

Pre-2008 was not economic stimulus. It was an out of control credit bubble. Those have happened before too, under Tory governments.

 

Incidentally prior to 2008 the biggest ever deficit was under Major's government in 1993.

[MrSmith]

In the fairly unique situation we keep stimulating to avoid slipping into a depression. Quite simply we avoid the mistakes of the 1930s.

 

Pre-2008 was not economic stimulus. It was an out of control credit bubble. Those have happened before too, under Tory governments.

 

Incidentally prior to 2008 the biggest ever deficit was under Major's government in 1993.

 

It was an out of control credit bubble which stimulated the economies of the world, without which there wouldn't have been growth in the first place.

 

Yes you are correct in that it has been continuous for some time, but the banks had to find ever more complicated and ingenious ways to lend people money in order to keep the illusion of growth alive. People where happy with the banks whilst they managed to keep this illusion alive, but now blame them for the collapse and apparently now want the government to borrow money to keep the illusion alive.

[I1L2T3]

It was an out of control credit bubble which stimulated the economies of the world, without which there wouldn't have been growth in the first place.

 

Yes you are correct in that it has been continuous for some time, but the banks had to find ever more complicated and ingenious ways to lend people money in order to keep the illusion of growth alive. People where happy with the banks whilst they managed to keep this illusion alive, but now blame them for the collapse and apparently now want the government to borrow money to keep the illusion alive.

 

A credit bubble and fiscal stimulus are not the same thing.

[MrSmith]

A credit bubble and fiscal stimulus are not the same thing.

 

Let’s see, a credit bubble stimulated the economy by allowing people to spend money they don’t have and stimulus stimulates the economy by allowing the government to spend money they don’t have, without each the economy wouldn't be growing.

 

What’s the difference other than who provided to money and takes on the debts? And how would the economy have been in growth prior to the banking crisis if the banks hadn’t been lending money to people.

[anywebsite]

Let’s see, a credit bubble stimulated the economy by allowing people to spend money they don’t have and stimulus stimulates the economy by allowing the government to spend money they don’t have, without each the economy wouldn't be growing.

 

What’s the difference other than who provided to money and takes on the debts? And how would the economy have been in growth prior to the banking crisis if the banks hadn’t been lending money to people.

 

The economy wouldn't grow if banks weren't lending to people. Private banks create most of the money in the economy by lending to people, when they stop doing that there is less money & we have a recession.

 

The who is providing the money matters a lot. One gets added to national debt & is done by a government supposedly elected by the people, the other is just created out of air by private banks.

 

We haven't really had a fiscal stimulus anyway, the government just gave a lot of extra money to banks, the money created by "quantitative easing" was just swallowed by private banks who still didn't lend, it never reached the real economy. The extra government borrowing was just to maintain public spending despite much lower tax receipts & bail out the banks, we didn't get a Hoover dam or anything. When there is less money provided by private banks, something needs to fill the gap, or we get the last 4 years.

[MrSmith]

The economy wouldn't grow if banks weren't lending to people. Private banks create most of the money in the economy by lending to people, when they stop doing that there is less money & we have a recession.

That’s right the banks lent money which ultimately caused both the growth and then the crash and for people to blame them for the crash seem a bit hypocritical, unless they also didn't want the growth.

The who is providing the money matters a lot. One gets added to national debt & is done by a government supposedly elected by the people, the other is just created out of air by private banks.

And in either case it as to be paid back by the people.

 

We haven't really had a fiscal stimulus anyway, the government just gave a lot of extra money to banks, the money created by "quantitative easing" was just swallowed by private banks who still didn't lend, it never reached the real economy.

 

It was banks lending money in the first place that caused the problems; it seems a bit daft to stimulate the banks so that they can lend even more money.

The extra government borrowing was just to maintain public spending despite much lower tax receipts & bail out the banks, we didn't get a Hoover dam or anything. When there is less money provided by private banks, something needs to fill the gap, or we get the last 4 years.

 

Again, that’s my point, if people want to enjoy booms they have to tolerate busts, they can’t really expect a continual boom.

[I1L2T3]

Let’s see, a credit bubble stimulated the economy by allowing people to spend money they don’t have and stimulus stimulates the economy by allowing the government to spend money they don’t have, without each the economy wouldn't be growing.

 

What’s the difference other than who provided to money and takes on the debts? And how would the economy have been in growth prior to the banking crisis if the banks hadn’t been lending money to people.

 

I think you're at risk of arguing yourself into a corner by implying that any form of economic stimulus is bad. Clearly that is not true.

 

What I think you are highlighting is two instances where economic growth was stimulated in the wrong way. I agree as it happens.

 

However, if we want to understand the mistakes and learn from them lumping the two instances together does not help. The solutions to both are very different.

 

problem 1: credit bubble. It's been discussed extensively on here want went wrong.

problem 2: short-run fiscal stimulus 2008-. The problem for me is not that it happened but how it happened. We basically spent a lot of money to avoid a depression but we have nothing to show for it. No legacy of decent infrastrucure projects some of the money could have been used for instead.

[Jim Graham]

History will show that the Tories inherited an economy that was growing out of recession then flipped everything into reverse.

 

 

 

Any fool, even Gordon Brown, can grow an economy if they borrow £163.4bn a year which is what Labour did in 2009/2010. The trick the current government is trying to get right is growing an economy when borrowing a lot less. But, hey, it's easy to sit on the sidelines and criticise isn't it? Nearly as easy as spending other people's money.

[Jim Graham]

One day JG and the uphill gardener will live a long and very productive life , on there own plannet.

 

Yes, on a planet where poor grammar and bad spelling will be outlawed.