The next Tory recession?

[I1L2T3]

Labour were already growing the deficit before the financial crisis hit. The huge deficit wasn't all down to the impact of the crisis.

 

http://www.theguardian.com/business/2008/jan/21/economics.prebudgetreport2007

 

£40bn a year borrowing was probably too much but the point I'm making is that a year after that article the deficit was £160bn.

 

It quadrupled in a year but not because Labour was employing more nurses, building more schools etc.... It quadrupled because:

 

1. Britain had (and still has) an over-reliance on financial services. When the crisis hit we suffered a massive impact on that sector and that rippled out to other sectors. We lost 6% of GDP in one year and that impacted tax receipts. The shortfall had to be made up.

 

2. The recession (remember rapid 6% loss in GDP) caused the government to have to fund unplanned out of work benefits.

 

3. We had the costs of bailing out several major banks, and providing support to the whole banking sector.

 

4. There was some modest fiscal stimulus of around £10-15bn to help prevent the economic downturn becoming worse.

 

Until 2008 and without the crisis government borrowing was totally sustainable. The level of borrowing did not cause the crisis. That is the truth of the matter.

 

If you want to argue it was not OK then, then how can you argue that Osborne's far higher sustained borrowing and doubling of the debt is OK now?

[Mister M]

There was a phase of deregulation under Thatcher but not in the areas which caused the problems. The banks did very well in the '80s and '90s.

The banks got into trouble because of their low capital requirements. This was instituted by Labour. There's no getting away from this.

Light touch regulation is not a problem in of itself. Low capital requirements on the other hand leave banks incapable of absorbing reasonable losses from big market corrections. This has been corrected.

It would be nice if we had lots of small banks rather than a few big ones but it's too late now to prevent the mergers which caused this under Labour. Best to just be patient. New players will eventually enter the market and if Labour are still in opposition where they belong new mergers can be prevented.

 

 

---------- Post added 31-08-2015 at 07:33 ----------

 

The FTSE is up 400 points since this thread was started.

I'm afraid those who anticipated a "Tory recession" are going to be disappointed.

 

The Guardian seems to agree:

http://www.theguardian.com/business/2015/aug/27/ftse-100-stock-markets-china-us&cid=52778937999805&ei=OvTjVaiPPJKYUO_liIgK&usg=AFQjCNH6LbQgjz_Fa886gaH4QIWckcPa3A

 

As does the Independent:

http://www.independent.co.uk/news/business/sharewatch/market-report-surge-after-upbeat-us-gdp-data-helps-ftse-100-claw-back-most-of-black-monday-losses-10477781.html&cid=0&ei=OvTjVaiPPJKYUO_liIgK&usg=AFQjCNFw2BVGpX8kvKYDJX2WpxUT4uSoUw

 

Now that even the socialist papers agree that we're fine. Can we stop pretending that this is somehow proof that Osbourne is mishandling the economy please?

 

The Independent is not a socialist newspaper, it hoped for the coalition to continue after 2015.

The Guardian is a social democratic newspaper.

A socialist newspaper would be The Morning Star.

[I1L2T3]

You asked for links, now you have them.

Essentially everybody except you seems to be in agreement that the FTSE is doing very well despite international pressures. It's already well on the way to recovering.

 

Of course light touch regulation is fine. It always was.

What's not fine is allowing inadequate capital ratios.

What don't you understand?

 

Sorry, but you provided some random links unrelated to anything I asked about earlier

 

I will repeat again. The FTSE had its worst month since 2012. It has recovered slightly. That does not mean we are out of the woods.

 

So now you are saying that the bad regulation was all about capital ratios, and that the banking activities that got us in this mess (asset pooling, CDOs, derivatives, CDS) and still continue to this day are OK after all? The regulation to prevent the whole thing happening again is still not in place - Osborne is asleep at the wheel.

[unbeliever]

So now you are saying that the bad regulation was all about capital ratios, and that the banking activities that got us in this mess (asset pooling, CDOs, derivatives, CDS) and still continue to this day are OK after all? The regulation to prevent the whole thing happening again is still not in place - Osborne is asleep at the wheel.

 

I've always said that.

If banks want to invest some of their investors' money in more risky ventures, that's up to them. As long as they have enough real money in the cellar to absorb the losses it won't be our problem.

 

 

Really, a bad month is part of the normal ebb and flow of the stock market. The FTSE dropped to about 3530 under Labour. This is nothing.

[drummonds]

£40bn a year borrowing was probably too much but the point I'm making is that a year after that article the deficit was £160bn.

 

It quadrupled in a year but not because Labour was employing more nurses, building more schools etc.... It quadrupled because:

 

1. Britain had (and still has) an over-reliance on financial services. When the crisis hit we suffered a massive impact on that sector and that rippled out to other sectors. We lost 6% of GDP in one year and that impacted tax receipts. The shortfall had to be made up.

 

2. The recession (remember rapid 6% loss in GDP) caused the government to have to fund unplanned out of work benefits.

 

3. We had the costs of bailing out several major banks, and providing support to the whole banking sector.

 

4. There was some modest fiscal stimulus of around £10-15bn to help prevent the economic downturn becoming worse.

 

Until 2008 and without the crisis government borrowing was totally sustainable. The level of borrowing did not cause the crisis. That is the truth of the matter.

 

If you want to argue it was not OK then, then how can you argue that Osborne's far higher sustained borrowing and doubling of the debt is OK now?

 

didn't labour have more than a decade to sort all those things. i seem to remember gordon brown was very big on words like prudence.

 

i keep hearing your whining that the debt has increased since 2010. it is clear to voters that the current government are cutting back labours spending commitments. i know that. everyone sensible in the country knows that. i'm pretty sure you know that, but as it's all you have to cling on to you keep on bringing it up as though it was caused by osbourne.

 

labour overspent whilst in government. we are having to make cuts now because of that.

 

---------- Post added 31-08-2015 at 10:27 ----------

 

Sorry, but you provided some random links unrelated to anything I asked about earlier

 

I will repeat again. The FTSE had its worst month since 2012. It has recovered slightly. That does not mean we are out of the woods.

 

.

 

isn't the ftse higher than it was in 2010? you try make the regular ripples sound like tidal waves.

Edited August 31, 2015 by drummonds

[unbeliever]

Okay, this is getting silly.

Everybody take a look at this: http://www.google.co.uk/finance?cid=12590587

 

The 'zoom' options allow you to take a look at longer trends, I suggest 10y (10 years). Take a look at what happened to the FTSE in the second half of 2008 and the first half of 2009. That's what Gordon Brown did to us.

 

Then take a look at the relatively tiny and short-lived dips in mid-2011 and mid-2012 and then this month. Puts some perspective on the matter I would have thought.

Having done all that, come back here and try to tell me we're having a serious problem with the UK stock market right now.

Edited August 31, 2015 by unbeliever

[WiseOwl182]

£40bn a year borrowing was probably too much but the point I'm making is that a year after that article the deficit was £160bn.

 

It quadrupled in a year but not because Labour was employing more nurses, building more schools etc.... It quadrupled because:

 

1. Britain had (and still has) an over-reliance on financial services. When the crisis hit we suffered a massive impact on that sector and that rippled out to other sectors. We lost 6% of GDP in one year and that impacted tax receipts. The shortfall had to be made up.

 

2. The recession (remember rapid 6% loss in GDP) caused the government to have to fund unplanned out of work benefits.

 

3. We had the costs of bailing out several major banks, and providing support to the whole banking sector.

 

4. There was some modest fiscal stimulus of around £10-15bn to help prevent the economic downturn becoming worse.

 

Until 2008 and without the crisis government borrowing was totally sustainable. The level of borrowing did not cause the crisis. That is the truth of the matter.

 

If you want to argue it was not OK then, then how can you argue that Osborne's far higher sustained borrowing and doubling of the debt is OK now?

 

 

The borrowing up to 2008 was not sustainable because it was based on a false and arrogant assumption of having ended boom and bust. When the inevitable bust came along, we were already borrowing too much. Had we been banking surpluses during the boom, we would've had less of a debt and deficit to deal with after the financial crisis hit. Osborne has halved the deficit already but I agree he could've gone further and cut benefits, including tax credits, a bit quicker and further.

[drummonds]

Okay, this is getting silly.

Everybody take a look at this: http://www.google.co.uk/finance?cid=12590587

 

The 'zoom' options allow you to take a look at longer trends, I suggest 10y (10 years). Take a look at what happened to the FTSE in the second half of 2008 and the first half of 2009. That's what Gordon Brown did to us.

 

Then take a look at the relatively tiny and short-lived dips in mid-2011 and mid-2012 and then this month. Puts some perspective on the matter I would have thought.

Having done all that, come back here and try to tell me we're having a serious problem with the UK stock market right now.

 

The borrowing up to 2008 was not sustainable because it was based on a false and arrogant assumption of having ended boom and bust. When the inevitable bust came along, we were already borrowing too much. Had we been banking surpluses during the boom, we would've had less of a debt and deficit to deal with after the financial crisis hit. Osborne has halved the deficit already but I agree he could've gone further and cut benefits, including tax credits, a bit quicker and further.

 

i wouldn't fret too much. some blame the ambulance crews for the time it takes to reopen a motorway after a car crash. the electorate know who caused the pile up which is why labour aren't trusted on the economy. i note that andy burnham says that labour must admit to overspending if they are ever to regain the trust of sensible voters.

[I1L2T3]

I've always said that.

If banks want to invest some of their investors' money in more risky ventures, that's up to them. As long as they have enough real money in the cellar to absorb the losses it won't be our problem.

 

 

Really, a bad month is part of the normal ebb and flow of the stock market. The FTSE dropped to about 3530 under Labour. This is nothing.

 

This was not just a bad month. It was the worst month since 2012 and in dire t response to serious events in China.

 

The reality is that given their current mode of operation, not just in the UK, the capital ratios will help ride out minor shocks but when the big one comes round again it'll be like trying to fix a severed leg with a band aid.

 

Taking Deutsche Bank as an example it is sitting on derivatives bets that are 20x German annual GDP. All just waiting for the fuse to be lit.

[unbeliever]

This was not just a bad month. It was the worst month since 2012 and in dire t response to serious events in China.

 

The reality is that given their current mode of operation, not just in the UK, the capital ratios will help ride out minor shocks but when the big one comes round again it'll be like trying to fix a severed leg with a band aid.

 

Taking Deutsche Bank as an example it is sitting on derivatives bets that are 20x German annual GDP. All just waiting for the fuse to be lit.

 

Ooh. "Dire". "Severed leg". I'm so scared.

 

You have no basis for asserting that another great financial crisis is just around the corner.

 

"The worst month since 2012". That's a really pathetic statistic by any standard. What happened after that terrible month in 2012? It recovered after about 3 months. Oh the tragedy!