Scribd Logo
Upload

Welcome to Scribd!

  • Hedging Bets On A Eurozone Debt Crisis

    Uploaded by

    omkar_puri5277
    70 views63 pages
    The document summarizes discussions from a seminar attended by IMF and European finance ministry officials on Europe's sovereign debt crisis. Key points discussed included: - There was consensus that high government debt levels posed major risks to the global economy. More needed to be done to reduce debt beyond just stabilizing levels. - Traditional long-term investors like pension funds were increasingly unwilling to invest in peripheral European countries' debt, even at high yields, due to reputational and regulatory concerns. - This reduced demand was driving up yields in countries like Greece, Ireland, and Portugal despite massive EU support programs. Hedge funds and other non-traditional investors were seen as potentially important buyers. - Funding European government debt over

    Original Description:

    Economics

    Original Title

    Hedging Bets on a Eurozone Debt Crisis

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    DOC, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document summarizes discussions from a seminar attended by IMF and European finance ministry officials on Europe's sovereign debt crisis. Key points discussed included: - There was consensus that high government debt levels posed major risks to the global economy. More needed to be done to reduce debt beyond just stabilizing levels. - Traditional long-term investors like pension funds were increasingly unwilling to invest in peripheral European countries' debt, even at high yields, due to reputational and regulatory concerns. - This reduced demand was driving up yields in countries like Greece, Ireland, and Portugal despite massive EU support programs. Hedge funds and other non-traditional investors were seen as potentially important buyers. - Funding European government debt over

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    70 views63 pages

    Hedging Bets On A Eurozone Debt Crisis

    Uploaded by

    omkar_puri5277
    The document summarizes discussions from a seminar attended by IMF and European finance ministry officials on Europe's sovereign debt crisis. Key points discussed included: - There was consensus that high government debt levels posed major risks to the global economy. More needed to be done to reduce debt beyond just stabilizing levels. - Traditional long-term investors like pension funds were increasingly unwilling to invest in peripheral European countries' debt, even at high yields, due to reputational and regulatory concerns. - This reduced demand was driving up yields in countries like Greece, Ireland, and Portugal despite massive EU support programs. Hedge funds and other non-traditional investors were seen as potentially important buyers. - Funding European government debt over

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 63

    Hedging bets on a eurozone debt crisis

    Post categories: world economy Stephanie Flanders | 12:52 UK time, Friday, 17 September 2 1 !oes "#rope need more hedge $#nds% &hat was one o$ the more intrig#ing '#estions to come o#t o$ a one(day seminar on "#rope)s so*ereign debt crisis + attended this wee, in -r#ssels. &he e*ent was co(sponsored by the +/F and -r#egel, the respected "#ropean thin, tan,, and it was held #nder the 0hatham 1o#se 2#le, which means + can)t tell yo# who said what. -#t + can gi*e yo# a $ew headlines. &he $irst is that 3eorge 4sborne wo#ld ha*e lo*ed it. "*eryone aro#nd the table ( aro#nd two do5en senior +/F and "#ropean $inance ministry o$$icials, leading pri*ate sector economists and bond mar,et in*estors ( agreed that the mo#ntain o$ debt sitting on go*ernments) balance sheets was one o$ the biggest ris,s $acing the global economy today. "d -alls wo#ld ha*e hated it, $or the same reason. 6o(one '#estioned the need $or go*ernments to rein in borrowing ( and there was *ery little ner*o#sness abo#t the pace o$ tightening already in train. +n $act, the worry was that higher debt ratios wo#ld pre*ent central ban,s $rom responding to the ne7t downt#rn, by p#tting #p press#re on interest rates. &heir $ear was that co#ntries wo#ld get into a negati*e loop, where high p#blic debt le*els prod#ce slower growth, and slower growth ma,es it that m#ch harder to bring down debt. 8nd it gets worse: most o$ the economists at the meeting didn)t thin, it was eno#gh to simply stabilise go*ernment debt at a new, higher le*el, as has happened a$ter most recessions since the war. /#ch was made o$ recent +/F research showing that most "#ropean co#ntries had costs coming down the trac, $rom ageing ( higher pension and health spending ( which co#ld ma,e the cost o$ bailing o#t the ban,s in 2 9(: loo, li,e a dry cleaning bill. 2elated wor, by 2oel -eetsma, an academic economist at the Uni*ersity o$ 8msterdam, concl#des that, on a*erage, "U go*ernments need to r#n a b#dget s#rpl#s o$ 1.;< o$ 3!P $or the ne7t two generations i$ baby boomers are going to come close to paying the cost o$ their e7tended old age. =es, yo# did read that right: a 1.;< b#dget s#rpl#s $or two generations. +n case yo# were wondering, a s#rpl#s is when the go*ernment ta,es in more re*en#es than it spends. >e)re not *ery $amiliar with them in the UK beca#se they ha*e only happened $i*e times in the last ? years. &his isn)t the time to re(open the debate abo#t a#sterity in the UK ( the $oc#s o$ the seminar was the e#ro5one, not the UK. -#t it was interesting that the mood o$ the room was so haw,ish. =o# might as, ( where do hedge $#nds come into this% &he answer is that the e7perts at the con$erence weren)t only concerned with the long(term challenge o$ bringing down "#rope)s

    so*ereign debt. &hey were also, #nderstandably, concerned abo#t go*ernments) ability to $inance their borrowing right now. 8nd here, non(traditional in*estors li,e hedge $#nds co#ld be more important to the e#ro5one in the ne7t year or so than ministers realise. 1ow% >ell, in the disc#ssion abo#t the state o$ play in the $inancial mar,ets there was an interesting disconnect between the o$$icials and the economists, on the one hand, and the asset managers and ban,ers who act#ally b#y and sell so*ereign debt. 8s we ,now, the interest rate ( yield ( on go*ernment debt $or problem co#ntries li,e 3reece, +reland and Port#gal has spi,ed #p again o*er the last $ew months, e*en despite that gargant#an s#pport programme $or the e#ro5one anno#nced in /ay. -y and large, the o$$icials at the seminar tho#ght this was beca#se in*estors were worried abo#t the $#ndamentals in these co#ntries: their long(term growth rate and their basic ability to re(pay. -#t the players $rom the @b#y(side@ o$ the mar,et s#ggested a more prosaic e7planation. =es, they said, o$ co#rse there are some concerns abo#t 3reece, and maybe +reland)s, long( term ability to a*oid a debt restr#ct#ring. -#t the high le*el o$ the yields right now more than ma,e #p $or that ris,. &his is do#bly tr#e o$ the li,es o$ Spain and Port#gal, where they A#dged the $#ndamental ris,s o$ a de$a#lt to be *ery small. &he real problem all these peripheral go*ernments are $acing, they said, is that the big traditional b#yers o$ go*ernment bonds ( li$e ins#rance companies, pension $#nds, and the li,e ( ha*e got to the point where they can)t or won)t b#y these assets at any price. B4r at least the $oreign instit#tions won)t ( domestic instit#tions in these co#ntries may contin#e to b#yC. Sometimes it)s reg#lation that)s h#rting demand $or bonds: many instit#tional in*estors are simply not allowed to in*est in assets a$ter the credit rating $alls below a certain le*el. -#t more o$ten, these participants said, it)s abo#t image, and h#ge ris, a*ersion. +nstit#tions don)t want to ta,e the rep#tational hit o$ in*esting in a co#ntry that ends #p restr#ct#ring its debt, e*en i$ it)s a tiny $raction o$ their port$olio, and e*en i$ they act#ally ma,e money on the deal. &he #pshot is that e*en i$ an asset manager has got an elaborate econometric model showing that Port#gal, say, is a good in*estment ( i$ the client says they don)t want Port#gal, the manager gets o#t o$ Port#gal. "nd o$ disc#ssion. 8s one person said at the seminar: @it doesn)t matter how high the yield is on 3ree, debt, i$ + can)t sell it, why wo#ld + b#y it%@ &his is where the hedge $#nds and other non(traditional in*estors come in. 4$ co#rse, they may not want to b#y this debt either, b#t they don)t ha*e the same reg#latory constraint to in*est in s#per(sa$e assetsD and, almost by de$inition, their clients want them to go $or game( changing plays, not $ollow the herd. So we co#ld ha*e a nice irony in the coming months. +n the a$termath o$ this crisis, many e#ro5one go*ernments ha*e $oc#sed their rhetoric ( and some o$ their reg#latory $ire ( on hedge $#nds and short(term spec#lators. -#t i$ these mar,et players are right, it)s the traditional, @long(termist@ in*estors that are now p#lling o#t o$ peripheral "#ropean debt mar,ets, ca#sing o$$icials in Eisbon and elsewhere so many sleepless nights.

    4ne thing that e*eryone at the seminar agreed on is that the $#nding o$ "#ropean go*ernment debt o*er the ne7t year or so loo,ed pretty tight, with a massi*e s#pply o$ new and mat#ring debt chasing a limited amo#nt o$ demand. &hat means there co#ld be more scary mar,et moments ahead $or the li,es o$ +reland and Port#gal. +$ this great "#ropean so*ereign debt train ,eeps r#nning thro#gh 2 1 and 2 11 witho#t some ,ind o$ $#nding crisis, it might ha*e some e*il hedge $#nds to than,.

    -oo,mar, with: del.icio.#s | !igg | 6ews*ine | 6owP#blic | 2eddit ( >hat)s this%

    Comments
    Sign in or register to comment.

    Pre*io#s 6e7t 1. At 1:11pm on 17 Sep 2010, EuroSider wrote: Stephanie, =o#r article is *ery interesting, and +)m s#re re*ealing to those that are interested in hedge($#nds. Personally + $o#nd mysel$ )phasing o#t). &here is one $#ndamental point in all this abo#t "#ropean debt. "#rope c#rrently operates #nder the French(Socialist system. +t does not ta,e into acco#nt the changes or demands $rom the international mar,ets and is not in a position to respond. =o# and other economists can arg#e the re'#irements o$ international $#nding #ntil the end o$ yo#r days. +t ma,es no di$$erence. &he whole point o$ "#rope, economically, is that it is not *iable in any real economic sense. +t does not wor, economically, politically or socially. &he "#ropean model is #n(s#stainable in the 21st cent#ry. 0ertainly not in the $ace o$ emerging economies li,e 0hina, +ndia and So#th 8merica. =o#, and other commentors, can attend as many "U con$erences in -r#ssels as yo# li,e Bor yo#r editor is prepared to pay $orC. &he simple matter is that #nless radical changes are made to the "U)s social and economical str#ct#re B$ollowing the +/F)s recommendationsC the c#rrent "U will cease to e7ist.

    0omplain abo#t this comment

    2. At 1:20pm on 17 Sep 2010, Sage_of_Cromerarrh wrote: Stephanie, +t)s somewhat com$orting to hear that the people in power are now starting to ta,e some tho#ght $or the longer term. 2ealising at last that we need a paradigm shi$t in attit#des to sa*ing and s#rpl#s *ers#s borrowing and debt. 1owe*er, +)m s#re the di$$ic#lt decisions that this will inc#r will pre*ent proper action and instead the rhetoric will all be abo#t how do we get more growth so that we can ha*e o#r ca,e, eat it, and then order another one. 0omplain abo#t this comment

    F. At 1:34pm on 17 Sep 2010, DrLo er wrote: + don)t ,now whether Stephanie is right on the irony o$ all this, b#t it)s certainly good $or a la#gh. 1edge $#nds ha*e made $ar st#pider bets than this in the past B"/+ springs to mind, and + don)t care how m#ch 3#y 1ands bleats that he was misledC. 6ow all we need is the hedge $#nd e'#i*alent o$ 0!4s, where the ris, o$ sha,y go*ernment debt is spread across 3reece, Port#gal, +reland and Spain (( throw in a co#ple o$ real bas,et cases, li,e Gimbabwe, A#st $or $#n (( and we)re bac, to what passed $or normal in 2 7. + can)t wait. 0omplain abo#t this comment

    ?. At 1:!3pm on 17 Sep 2010, watri"er wrote: 8nd who will lend to the hedge $#nds% &he con*entional wisdom o$ c#ts to p#blic sector b#dgets is the same as c#ts to the de$icit appears to be #ni*ersal. +t is /icawber moneynomics and ass#mes that actions on the state $inances has little in$l#ence on the wider economy. &hey thin, they are c#tting a b#dget b#t in reality they simply adding to the demand on another p#blic sector b#dget. &his is partic#larly tr#e in the case o$ mass red#ndancies in go*ernment and town halls and c#ts in capital spending ( the *ast maAority o$ which goes directly to the pri*ate sector. &his is not ta,ing into acco#nt the non(monetary loss o$ *al#e in the red#ced ser*ices. &he c#rrent war dance o$ a#sterity m#st not be con$#sed with e$$iciency arg#ments which hold regardless o$ the short term deterioration o$ the state debt. 0omplain abo#t this comment

    5. At 2:0#pm on 17 Sep 2010, Demp ter wrote: )&heir $ear was that co#ntries wo#ld get into a negati*e loop, where high p#blic debt le*els prod#ce slower growth, and slower growth ma,es it that m#ch harder to bring down debt)

    &here $ear is not that it will be m#ch harder, they $ear it will be impossible. 4nce yo# ta7 past the rate o$ 5 < o$ 3!P #ltimately the ta7 ta,e m#st $all. 8nd hereHs why: Find a blan, piece o$ paper and: !raw a *ertical a7is and name it I3ross 2e*en#e 0ollectedH. !raw a 1ori5ontal a7is and name it I3ross !omestic Prod#ctH. >here the two a7is meet write the n#meral I H. 8t a point s#$$iciently distant $rom the n#meral on the hori5ontal a7is write the n#meral I1 H, this e'#ating to 1 < o$ the 3ross !omestic Prod#ct. 6ow ass#ming yo# ta7 at the rate o$ < o$ 3!P, clearly yo# will get no money in. 6ow ass#me yo# ta7 at the rate o$ 1 < o$ 3!P, again yo# will get no money in. >hy yo# may as,% >ell, wo#ld yo# wor, all wee, to gi*e all that yo# earned to the 3o*ernment, and be #nable pay $or $ood, clothes or anything else $or that matter% 0onse'#ently there is a point between < and 1 < ta7 rate o$ 3!P where the 3o*ernment ta7 receipts will start to $all i$ the o*erall rate o$ ta7ation is increased. 3i*en that the simplest answer is #s#ally the correct oneD that point is li,ley to be 5 < o$ 3!P. &here$ore to connect the points and 1 on yo#r graph, get a s#itably si5ed semi circle and draw the c#r*e connecting the two. +t stands to reason that when one attempts to ta7 at a higher rate than 5 < o$ 3!P, then ta7 re*en#e will grad#ally start to decline, and the $ather past 5 < yo# go the $aster the decline will be. 8t the c#rrent rate o$ debt accleration we will pass that point in the near $#t#re. 8nd then the games #p. 0omplain abo#t this comment

    ;. At 2:0$pm on 17 Sep 2010, %p2 nuff wrote: SF )... by p#tting #p press#re on interest rates. ...) ((((((((((((((((((((((((((((((((((((((((((((((((((((((( 1mnn. 6ot s#re what yo# mean, Stephanie. Press#re to p#t UP interest rates% 4r p#tting #p press#re to ta,e rates down to 5ero% Eogically, it wo#ld be the $irst. >e are told BsomeC ta7es are good $or #s and are in place to change o#r beha*io#r. -#t i$ all these people thin, debt is bad, sho#ld we not ha*e higher ta7 Bie. interest ratesC to disco#rage its #se% 0omplain abo#t this comment

    7. At 2:2#pm on 17 Sep 2010, AnotherEngineer wrote: JF !rEoser wrote 1edge $#nds ha*e made $ar st#pider bets than this in the past B"/+ springs to mind, and + don)t care how m#ch 3#y 1ands bleats that he was misledC. KKKKKKKKKKKKKKKKK &his was pri*ate e'#ity not a hedge $#nd 0omplain abo#t this comment

    9. At 2:!1pm on 17 Sep 2010, &ran'e 'a (one wrote: &his comment has been re$erred $or $#rther consideration. "7plain

    :. At 2:!3pm on 17 Sep 2010, S"eep)Dormou e wrote: &he nations in the e#ro(5one are so*ereign states b#t they do not ha*e control o$ their c#rrency. &he e*ents #n$olding seem to me to be a stic,ing plaster that may, A#st, postpone the day when the one or more states ha*e to lea*e the e#ro. 3ermany has bo#ght them time, b#t how m#ch longer will she contin#e% 6ot at all, A#dging by this report. So does the ne7t crisis hit when the present tranche o$ money r#ns o#t and they ha*e lost the hedge $#nd money% +$ the worst does happen and a co#ntry is on the point o$ de$a#lting its debt, where will they go ne7t, the local pawn shop% /ore serio#sly, the $act that this is e*en being written abo#t, here or anywhere, indicates to me that o#r leaders ha*e r#n o#t o$ ideas. &heir barrel is almost empty. +s this now their last throw o$ the dice be$ore the system does collapse% /aybeD b#t maybe it will wor,. >hether it does or not, there is a need to start showing the people o$ "#rope and the P++3S in partic#lar, how their economies will be reb#ilt. &he policies at the moment are ignoring the e$$ect on the indi*id#als in each co#ntry)s pop#lation. Poor psychology, it will pro*ide the seedcorn $or dissent and worse. +t where e7tremists thri*e 0omplain abo#t this comment

    1 . At 3:02pm on 17 Sep 2010, *ma'1 wrote: So all good then more hedge $#nds more astronomical bon#s)s all creamed o$$ the sweat o$ the wor,ing mans brow. 0omplain abo#t this comment

    11. At 3:0!pm on 17 Sep 2010, (ohn_from_+endon wrote: + am a little con$#sed abo#t whether na,ed short selling is or is not permitted in $#ll and $rom when and to what e7tent it was permitted again Bwhen was thisC% L6a,ed Short selling K ta,ing a position in a sec#rity witho#t owning the sec#rity, or borrowing the sec#rity Band most li,ely witho#t the money to pay $or the p#rchase o$

    the positionMC +n the hopeNe7pectation that the position mo*es in s#ch a way as to enable it to be li'#idated be$ore ha*ing to act#ally complete the transaction.O +n the US8 it was illegal #nder S"0 and FS8 r#les $or a while at the height o$ the crisis, b#t it seems that the r#les ha*e been s#bse'#ently rela7ed. +n a sense this acti*ity is A#st a mar,et mechanism ( the problem only arises in a disorderly mar,et. &his acti*ity is not really #n#s#al or e*en new. +t was possible to sell stoc,s that yo# did not own and then pay to hold o*er the settlement o$ the transaction to the ne7t acco#nt decades ago e*en with acco#nt period settlement Bsee bac,wardation and contangoC and not A#st stoc,s b#t + thin, the acti*ity dates bac, to shipping and the e7pectation that a ship will arri*eC. P#estions arise abo#t $inancial instit#tions lending those engaging in these acti*ities money that they Bthe $inancial instit#tionC do not ha*e this creating new BgamblingC money sometimes sec#red on the deal. &here are *ery good reasons to hedge in the commodity mar,ets $or e7ample the '#estion is sho#ld we permits ban,s to loan money Bthey ha*e created $or the p#rposeC to gamble in this way% /y g#ess is that the lenders sho#ld s#$$er a $inancial penalty B&obin &a7 li,eC when they do so, to gently diss#ade then $rom engaging in this A#st as a gamble. 0omplain abo#t this comment

    12. At 3:1!pm on 17 Sep 2010, ,ohn*o)$11 wrote: Stephanie i remember when yo# #sed to get se*eral h#ndred comments e*ery day. >ell, at least that was be$ore yo# too, a month o$$ in the s#mmer and le$t that same o#t o$ date piece sitting there. Eittle by little most dri$ted away bored. 8dded to this yo# ha*e A#st too o$ten written pieces disc#ssing the @s#rprise news@ which almost e*eryone e7cept yo# and the e7perts were e7pecting. &his smac,s o$ a lac, o$ h#mility and de*al#es economics. 0learly its not a science. +t has no theories and no way o$ testing anything. Q#st a load o$ dogma and graphs. + thin, most o$ all tho#gh its A#st we ,now now that yo# economists ,now no more than the rest o$ #s. +t appears that it is personality, and political preA#dices that largely dictate an economist)s analysis and not the other way aro#nd. &hat is simply a $#nction o$ sel$ interest. Q#st last year the economists consens#s was )c#ts bad) and )print more money good) there is de$lation now it is the opposite. So no its not @3eorge 4sborne that wo#ld lo*e it@ b#t another 3eorgeD 3eorge 4rwell. +)m not really interested in 1edge F#nds #nless its ta7payer money going in. +ts not a '#estion o$ need b#t the e7istance o$ eno#gh opport#nity to attract new in*estment in them. 6eed is a somewhat emotional word to #se by an economist. 0omplain abo#t this comment

    1F. At 3:!0pm on 17 Sep 2010, S"eep)Dormou e wrote: !empster + cannot $a#lt yo#r analysis abo*e at J5. + hadn)t tho#ght o$ it li,e that. /any people will try and wor, to ,eep body and so#l together $or a long time a$ter logic wo#ld indicate that they sho#ld stop. &his wo#ld be partic#larly tr#e i$ the state paid inade'#ate allowances $or $ood etc. &he rhetoric seems to indicate that they are heading in that direction. +t all points to the need to change the system and red#ce payments the state has to ma,e. "*eryone in the co#ntry is going to be poorer. So why sho#ld we not pay o$$ o#r debt with debt $ree po#nds and red#ce the o#tgoings a little. >ith #nemployment at the le*el it is, the economy is not wor,ing to capacity. &he go*ernment seems to be the main so#rce o$ in$lation at the moment, p#tting #p ta7es etc. &he #nderlying in$lation rate e7cl#ding the go*ernment inspired changes, is, + belie*e really '#ite low. &he go*ernment sho#ld be ens#ring that its e7pendit#re ma7imises the spend in UK to red#ce the import bill. >ith so many other co#ntries also ta,ing a#sterity meas#res e7ports may not rise. 8t the moment, the go*ernment relies on monetary policy to control thingsD in my *iew a *ery bl#nt instr#ment. +t sho#ld s#rely loo, to $iscal meas#res $ar more $re'#ently to do this. 0omplain abo#t this comment

    1?. At 3:!1pm on 17 Sep 2010, Amu ed2Death wrote:

    /adam today yo# write or paraphrase: )"U go*ernments need to r#n a b#dget s#rpl#s o$ 1.;< o$ 3!P $or the ne7t two generations i$ baby boomers are going to come close to paying the cost o$ their e7tended old age.) /yM myM /s Flanders, is this yet not another swipe at baby boomers % !o yo# mean to say that any gro#p sho#ld be sel$ $inancing as they pass thro#gh Ei$e % 4r do yo# mean that all c#rrent and some $#t#re generations will ha*e to $inance greedyNneedy baby boomers in their old age % Eoo, at both sides o$ the balance sheetM &his generation paid in the main $or >>2. &his is the generation that lea*es a$ter the de*estation o$ war: a legacy o$ roads, schools, #ni*ersities and hospitals, a signi$icant addition to the 6ational 1o#sing Stoc,,

    and an e7tensi*e de*elopment o$ 1#man 0apital in medicine, technology and scienti$ic progress. +n 6et &erms $#t#re generations are '#ids inNe#ros in. >ith perhaps the e7ception o$ a $ew co#ntries s#ch as 3reece. 6ot the UK...s#rely not % 8nyone can prod#ce a >illets(style parti pris 046Q"0&U2"! theory and dress it #p as so#nd #ne'i*ocal &2U&1. + tho#ght bac, in an early 8#g#st Flanders blog that yo# did not gi*e a $air appraisal o$ !a*id >illets) analysis. +n /14 a real shame as he too is a boomer M 0omplain abo#t this comment

    15. At 3:!4pm on 17 Sep 2010, -"ue -err) wrote: 1edging bets on a e#ro5one debt crisis. "*en yo#r title alarms meM "#rope may need more transparent R reg#lated hedge $#nds, the sort that can)t hedge $#nds against so*ereign debt. &he e*ent was co(sponsored by the +/F and -r#egel, a day(long e*ent disc#ssing possible impro*ements in go*ernment debt and ris, management practices R policies in the $ace o$ higher so*ereign ris, Bwhich was partially created by hedge $#nds betting against so*ereign debt in the $irst place. +Hll bet this was ne*er disc#ssed at the meeting.C. &he con$erence consisted o$ $o#r sessions with the $inal one ending with a ,eynote address by !omini'#e Stra#ss(Kahn, +/F /anaging !irector. +n this Policy -rie$, -r#egel Senior Fellow 2einhilde Se#gelers and /ichele 0incera, Pro$essor, Uni*ersitT libre de -r#7elles, drew attention to yo#ng leading inno*ators Ba,a )yollies)C. &hey e7plain why the "#ropean Union)s b#siness 2R! de$icit, relati*e to the United States, can be attrib#ted to the "U ha*ing $ewer yollies, especially those that are less 2R! intensi*e. B6o one will e*er con*ince me that the "U is behind the United States in 2esearch and !e*elopment.C +n this policy brie$, the a#thors, -r#egel Senior Fellow 6icolas STron and StTphane 2ottier, 6ational -an, o$ -elgi#m, e7plain why now is the time to $oc#s on b#ilding stronger global p#blic instit#tions, creating globally integrated capital(mar,ets, addressing competiti*e distortions...So#nds pretty ba$$ling, b#t the one thing yo# will not see is: generating consistent $inancial re$orm R reg#lation% 3etting the "#ropean economy bac, on trac,: &his 0on$erence will occ#r September F ,2 1 . 8t an e*ent chaired by -r#egel, Since 0able, UK Secretary o$ State $or -#siness, +nno*ation and S,ills, will disc#ss the lessons learnt $rom the economic crisis and will loo, at the threats to and opport#nities $or growth in the global and "U economy. 0able will co*er the role o$ trade, the single mar,et and other "U policies in $ostering e'#itable and s#stainable growth. &he session will be chaired by -r#egel director Qean Pisani(Ferry. &o date, a$ter all the prelim leading #p to the Sept. F th 0on$erence, no(one has '#estioned the need $or go*ernments to rein in borrowing. &here was m#ch $ear$#l tal,, s#ch as $ear that co#ntries wo#ld get into a negati*e loop, where high p#blic debt prod#ces slower growth, and slower growth ma,es it that m#ch harder to bring down

    debt. 8nd it gets more $ear$#l: most o$ the economists at the meeting didn)t thin, it was eno#gh to simply stabilise go*ernment debt at a new, higher le*el, as has happened a$ter most recessions since the war. /#ch was made o$ recent +/F research showing that most "#ropean co#ntries had costs coming down the trac, $rom ageing ( higher pension and health spending. 2elated wor, by 2oel -eetsma, an academic economist at the Uni*ersity o$ 8msterdam, concl#des that, on a*erage, "U go*ernments need to r#n a b#dget s#rpl#s o$ 1.;< o$ 3!P $or the ne7t two generations i$ baby boomers are going to come close to paying the cost o$ their e7tended old age. Fear is a great moti*ator. 4,ay, where do hedge $#nds come into this% &he answer is that the e7perts at the con$erence weren)t only concerned with the long(term challenge o$ bringing down "#rope)s so*ereign debt. &hey were also concerned abo#t go*ernments) ability to $inance their borrowing right now. 8nd here, non(traditional in*estors li,e hedge $#nds co#ld be more important to the e#ro5one in the ne7t year or so. -#t + maintain that these hedge $#nds absol#tely m#st be reg#lated U no more $ree( wheeling, #n'#estioning betting against so*ereign debt. &he real problem is that the big traditional b#yers o$ go*ernment bonds don)t want to ta,e the rep#tational hit o$ in*esting in a co#ntry that ends #p restr#ct#ring its debt, e*en i$ it)s a tiny $raction o$ their port$olio, and e*en i$ they act#ally ma,e money on the deal, #nless o$ co#rse they ha*e hedged their bets against the co#ntry to start with. &hen, they)re la#ghingM 1edge $#nds and other non(traditional in*estors may not want to b#y this debt either, b#t they !46H& 18S" &1" S8/" 2"3UE8&42= 046S&28+6& to in*est in s#per(sa$e assetsD and, almost by de$inition, their clients want them to go $or high( ris,, big money. >hat this means is #nreg#lated hedge $#nds will bet, bet, bet and bet... So we co#ld ha*e a nice irony in the coming months. +n the a$termath o$ this crisis, many e#ro5one go*ernments ha*e $oc#sed their rhetoric ( and some o$ their reg#latory $ire ( on hedge $#nds and short(term spec#lators. >ell, yo# canHt arg#e that their e7otic in*estments Bderi*iti*es, negati*e de$a#lt swaps, etc.C began all the tro#ble in the $irst placeD so, is the answer to allow hedge $#nds #nreg#lated betting all o*er again% >hat a play hedge $#nds are ma,ing, s#pported by the +/F and -r#egel, b#t &1" "U has already gi*en their appro*al to an o*erha#l o$ the way ban,s and mar,ets in the region are s#per*ised. &he "U has warned that new pan("#ropean Union watchdogs wo#ld need to e7ercise their powers. +n 3ermany, Eeo !a#t5enberg, a member o$ 0hancellor 8ngela /er,elHs r#ling 0hristian !emocratic Union, and one o$ its $inance policy e7perts in parliament, hailed agreement on the "U $inancial s#per*ision pac,age as Vclosing an important gap in $inancial mar,et reg#lationW. -#t he warned the three new "U(le*el watchdogs U $or the ban,ing, ins#rance and sec#rities mar,ets sectors U m#st #se their powers o*er national instit#tions and mar,ets with care. Under the proposals, these watchdogs will not s#per*ise companies or mar,ets directly, lea*ing this to national a#thorities. -#t they will be re'#ired to draw #p common technical r#les R standards and co#ld ac'#ire additional legally binding powers. /r !a#t5enberg also stressed the importance o$ the V$iscal sa$eg#ardW incorporated into the agreement. &his pre*ents the watchdogs $rom imposing decisions that a$$ect b#dgets in member states. UK go*ernment o$$icials ha*e already said they belie*e the $inal pac,age, sec#red a$ter months o$ negotiation, is Va *ery good o#tcome $or the UK, -U& the UK was scr#tinising the $ine details.

    &he "#ropean 0entral -an, is also li,ely to ha*e been pleased by the o#tcome, which gi*es it a central role in assessing $#t#re ris,s to "#ropeHs $inancial system and allows the "0- president to chair a new "#ropean Systemic 2is, 0o#ncil $or the $irst $i*e years. &he reaction s#ggested that the proposed legislation co#ld get more $ormal bac,ing when "U $inance ministers meet in -r#ssels this &#esday. &he legislation co#ld then be p#t to the "#ropean Parliament this month. "U o$$icials were hoping to ha*e the appro*al process completed by the end o$ September so that the new watchdogs can get #p and r#nning by Qan#ary 1st. So, Eondon, are yo# so ner*o#s abo#t s#per*isory powers shi$ting away $rom the UK that yo# will let the dogs loose% &he dogs are called !eri*ati*e R Short(Selling. -eware these dogs. +n my opinion, Eondon, yo# let these dogs r#n loose and lots o$ people are going to get bit. 0omplain abo#t this comment

    1;. At 4:00pm on 17 Sep 2010, gho tof i'huan wrote: &he proposal is that the instr#ments that ca#sed the crisis sho#ld be #sed to sol*e the crisis....now that is go*ernmental thin,ing...probably a res#lt o$ $inancial ser*ices arm twisting. 8nyone reading demographic in$ormation a decade ago co#ld see the coming iss#es related to an aging pop#lation, yet no pro*isions were made, or i$ made those $#nds were raided by the politicians. &his remains a crisis o$ go*ernmental mis(managment and too m#ch in$l#ence by the ban,ers. 8ll proposals will bene$it the ban,s..they are in control. + g#ess we are s#pposed to be enco#raged that proposals are being s#pported by economists...similar to steal interests ad*ocating sales to Qapan right be$ore the war. 0omplain abo#t this comment

    17. At 4:1$pm on 17 Sep 2010, (u tin1!0 wrote: J7 yo# beat me to it. Sadly JF comment is abo#t as well researched most "U politicians. Eet see c#rrent "U proposals are e$$ecti*ely: 1. /ost hedge $#nds are in UK, that is bad 2. /ost hedge $#nds are independent and do not $ollow political dictats: that is bad. F. Pri*ate e'#ity are either US8 based or UK based: do#ble bad ?. Pri*ate e'#ity does not listen to "U politiciansD bad &here$ore lets reg#late them o#t o$ e7istance thereby BaC dragging down UK a notch or two BbC mo*ing "U $inancial centre away $rom Eondon to where it really sho#ld be which is o$ co#rse Paris Bi$ yo# are FrenchC or Fran,$#rt Bi$ yo# are 3ermanC ( no other *iews co#nts. Eatest reports pri*ate e'#ity sho#ld not be allowed to sell assets or parts o$ b#sinesses

    they b#y ( beca#se that is 8nglo(Sa7on asset stripping. 4nce "U has dealt with pri*ate e'#ity they will then t#rn their attentions to shareholders ( a$ter all #ltimately who do these shareholders thin, they are trying to sell to someone the "U politicians ha*e not annointed as the b#yer% 0omplain abo#t this comment

    19. At 4:!4pm on 17 Sep 2010, uper'a"mdown wrote: 3ood grie$ M Q#st close the ta7 loopholes and dodges. 2aise the higher rate a bit. 8llow a bit o$ e7tra +n$lation. -#ild a$$ordable $amily homes so the $#t#re generations will be born... 8nd yo#r problem is hal$way sol*ed. 6e7t yo# need a credible policy regarding +mports, so local man#$act#rers can compete, re balancing the economy, and pro*iding Aobs. 4r $ind eno#gh e7ports to co*er the cost o$ imports. Simples M 0omplain abo#t this comment

    1:. At 4:!$pm on 17 Sep 2010, feed*a'."oop wrote: J5 !empster Ei,e yo#r limit state analysis $or the ta7 ta,e ( b#t dont agree that 5 < is necessarily the t#rning point ( /y reaction to Stephs latest blog is to ponder what le*el o$ p#blicNpri*ate debt is optimal $or the economyNsociety. &a,ing the limit state again ( clearly its hard to en*isage a 5ero le*el o$ debt $or most indi*id#als in a modern #, economy #nless we all eat grass and li*e in cardboard bo7es ( b#t e'#ally it wo#ldn)t ma,e sense $or an indi*id#al to be loaned s#bstantially more than hisNher li$etimes Bli,elyC total earnings ( e*en tho#gh + belie*e that in Scanda*ia yo# #sed to be able to get a 1 yr mortgage to lea*e to yo#r s#r*i*ing relati*es.......so again somewhere between the two is the right answer ( b#t not necessarily 5 <. + s#ppose that i$ we go bac, to a barter economy where e*eryone is trading immediate commodities and ser*ices Be.g. a hairc#t $or a chess setC the rot begins to set in the moment we trade one hair c#t a wee, $or 1 chess sets at the end o$ the year. "*en worse when we sell this contract to some bald g#y ( and then sec#ritise and trade it $or 2 electric hair dryers to be deli*ered in china in 2 2 . Perhaps thats what ca#sed the crash %

    0omplain abo#t this comment

    2 . At !:43pm on 17 Sep 2010, /e tmor"andia wrote: &he hedge $#nd ind#stry is one o$ the best things abo#t this co#ntry. >e ha*e some o$ the best asset managers $rom all across the globe in Eondon, and hedge $#nds ha*e historically been better per$orming and more stable than, s#pposedly sa$er, ordinary in*estment $#nds. +t)s a crying shame that we)*e started bashing them on the ass#mption that they are li,e in*estment ban,s Bi.e. completely irresponsibleC, beca#se they aren)t. +)m not saying they are altr#istic ( it)s A#st that when yo# are managing other people)s money, and ha*e money in the $#nd yo#rsel$ Bas they almost all doC, then they spend a lot o$ e$$ort ,eeping their assets sa$e and ma,ing pro$its sa$ely. &hey are easily one o$ the most mis#nderstood sections o$ o#r economy. People thin,ing that 3#y 1ands r#ns a hedge $#nd is perhaps part o$ the problem ( li,e + say, they are badly mis#nderstood. 0omplain abo#t this comment

    21. At !:44pm on 17 Sep 2010, tan*"ogger wrote: >hether 3reece de$a#lts or not is a p#rely political not an economic matter. Simply by o*eriding the r#les that the "0- has to obey, and the -an, can be allowed to b#y 3ree, bonds in whate*er '#antity is necessary to pre*ent the need to de$a#lt. &his probably wo#ld, o$ co#rse, ca#se the e7change *al#e o$ the e#ro to $all, b#t this might be welcome, especially $or 3ermany as it trys to maintain the high le*el o$ e7ports it traditionally needs to ,eep employment high. &he hedge $#nds are probably right to bet that the "#ro5one leaders wo#ld not allow a 3ree, de$a#lt, simply in order to obey arbitary r#les agreed d#ring the horse trading that was necessary be$ore setting #p the e#ro. &he e7cessi*e sa*ing propensity o$ the 3ermans maybe needs the e7cessi*e spending propensity o$ the 3ree,s to ,eep the "#ro5one economy balanced. +$ by some miracle the 3ree,s did manage to c#t their de$icit s#$$iciently to satis$y traditional bond b#yers, the e#ro wo#ld probably rise to a le*el which wo#ld ha*e a disastro#s e$$ect on 3erman e7ports. 0omplain abo#t this comment

    22. At 0:1$pm on 17 Sep 2010, f"i'. 2 wrote: http:NNwww.positi*emoney.org.#,N2 1 N :Ndo#glas(carswell(mp(introd#ces(bill(to( stop($ractional(reser*e(ban,ingN

    0omplain abo#t this comment

    2F. At 0:2#pm on 17 Sep 2010, 1eter 2it'hen wrote: Sometimes it)s reg#lation that)s h#rting demand $or bonds: many instit#tional in*estors are simply not allowed to in*est in assets a$ter the credit rating $alls below a certain le*el. (((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( So lets $ind away to allow them to in*est ( is this what they are saying% Find a way to allow instit#tions to in*est in A#n, on the chance that the 2 N1 nag might come in help red#ce the h#ge s#rpl#s needed to pay $or the ; )s babes% Under the @Peters,itchen r#le@ + cant re*eal my recipe b#t can gi*e yo# the headline ( eat too many beans and $lat#lence can ca#se a problem =o# ,now% that de$lating $eeling 0omplain abo#t this comment

    2?. At 0:33pm on 17 Sep 2010, 1eter 2it'hen wrote: Sept. 17 B-loombergC (( &reas#ries rose while the cost to protect +rish debt s#rged to a record on concern abo#t "#ropean go*ernment debt le*els and an #ne7pected drop in 8merican cons#mer con$idence. U.S. stoc,s $l#ct#ated and the e#ro $ell. F#ll o$ beans% 0omplain abo#t this comment

    25. At 7:1!pm on 17 Sep 2010, .a)*rae wrote: 3et +reland Port#gal and 3reece o#t o$ the "#ro, and let the mar,et prod#ce and set a le*el $or their own c#rrency , apply the same medicine to any other co#ntry in the ""0 that can) t balance it)s boo,s and they)ll soon all $ind ways o$ doing so. -est c#re o$ all howe*er wo#ld be to dismantle the political wing o$ the "U and set #p a $ree trade area within "#rope where all co#ntries wo#ld ha*e to compete $or trade and the "U wo#ld ha*e no say o*er the r#nning o$ any co#ntry. 0omplain abo#t this comment

    2;. At 7:30pm on 17 Sep 2010, AnotherEngineer wrote: J1 bmac1 wrote So all good then more hedge $#nds more astronomical bon#s)s all creamed o$$ the sweat o$ the wor,ing mans brow. KKKKKKKKKKKKKKKKKKKKKKKKKK

    1ow does that wor, then% + tho#ght hedge $#nds made their pro$its by predicting whether $inancial instr#ments wo#ld go #p or down. 0omplain abo#t this comment

    27. At 7:41pm on 17 Sep 2010, Sa ha C"ar. on wrote: 1ere)s a tho#ght $or some research. "#rope sho#ld be big eno#gh to be sel$(s#$$icient. Forget abo#t money $or a moment. >hat physical and manpower reso#rces do we need to gi*e the pop#lation a reasonable standarg o$ li*ing, $or di$$erent *al#es o$ @reasonable@. /a,e a sort o$ shopping list. &hen as, i$ these models o$ reso#rce cons#mption are s#stainable with proAected $#t#re demographic changes. +$ not, what, i$ any, le*el o$ reso#rces di*erted $rom today)s cons#mption to captal in*estment wo#ld be necessary $or a bearable s#stainable $#t#re. 1a*ing loo,ed at real reso#rces, only then consider the management o$ money. /oney is #seless i$ the goods and ser*ices aren)t a*ailable to p#rchase. /oney, as an entitlement to goods and ser*ices, sho#ld be the ser*ant and not the master. +n a rational world, most o$ these $inancial gamesters wo#ld be red#ndant and irrele*ant, b#t we will always need re$#se collectors, $armers and doctors $or e7ample. People sho#ld be rewarded $or being #se$#l. &hin, the #nthin,able and c#t the 3ordian ,notM 0omplain abo#t this comment

    29. At 7:44pm on 17 Sep 2010, 3*"i4ion wrote: + thin, a s#pposedly ne#tral, p#blically $#nded economics commentator who declares today that "#rope has a so*ereign debt crisis, sho#ld be $ired. 0omplain abo#t this comment

    2:. At 7:47pm on 17 Sep 2010, 3*"i4ion wrote: Un$ort#nately this entire blog entry was doomed $rom the start. 6ot only is the original post a total nonsense, the $irst reponse is too. + do not li,e it when the --0 stoops to the le*el o$ Fo7 6ews. Stop it. 0omplain abo#t this comment

    F . At #:0!pm on 17 Sep 2010, murf 7! wrote: X!empster J5 =o# are describing the Ea$$er c#r*e, b#t it is a more el#si*e concept than yo# ma,e o#t. &here)s act#ally little e*idence that a ta7 ta,e o*er 5 pc o$ 3!P red#ces economic

    growth. &here)s little empirical e*idence bac,ing any o$ the ass#mptions behind a concept which 8rth#r Ea$$er concocted one night on the bac, o$ a nap,in. >hat we do ,now, thro#gh obser*ation, is that the ideological attempt to red#ce ta7 has led to scanter p#blic ser*ice pro*ision, cr#mbling in$rastr#ct#re and, parado7ically $or its adherents, more *olatile mar,ets. 0omplain abo#t this comment

    F1. At #:24pm on 17 Sep 2010, 3*"i4ion wrote: &he "#ro de*al#ing dramatically wo#ld be great $or the UK. +t co#ld stop ha*ing to pretend with tragic toys li,e )a#sterity) that there was any hope o$ sa*ing Sterling $rom a similar $ate. +ndeed, + hear that spec#lators are only waiting $or the $arce to play o#t a little $#rther be$ore those nasty hedge$#nds start insisting that UK gilts go belly #p. +$ + was a -ritish con*enience store, +)d start pricing my loa*es in "#ro now. 0omplain abo#t this comment

    F2. At #:27pm on 17 Sep 2010, Demp ter wrote: F . 8t 9: 5pm on 17 Sep 2 1 , sm#r$s75 wrote: X!empster J5 )&here)s act#ally little e*idence that a ta7 ta,e o*er 5 pc o$ 3!P red#ces economic growth) +t)s not economic growth that +)m thin,ing abo#t, its the amo#nt o$ money the go*ernment can act#ally ta,e o#t o$ the 3!P. + rec,on that once it aims $or more than 5 <, it will end #p getting less, in essence more wor, is either not done, or done $or cashNbarter. 1ereHs another one $or yo#: 0#rrent ho#sehold debt is Y1?5;bn. &he 4$$ice $or -#dget 2esponsibility predicts that ho#sehold debt will be Y1,92Fbn by end 2 15 which is a growth o$ aro#nd 5< per ann#m. 6ational a*erage earnings BwagesC are c#rrently increasing at 1.5< per ann#m. So why does it predict s#ch growth when ho#seholds are already hopelessly indebted%

    0omplain abo#t this comment

    FF. At #:!1pm on 17 Sep 2010, 5i'hard Ding"e wrote:

    62$ 7%nfortunate") thi entire *"og entr) wa doomed from the tart8 9ot on") i the origina" po t a tota" non en e, the fir t repon e i too87 8greed. 8 common leitmoti$ r#nning thro#gh this blog is o*er ampli$ication o$ a $airly ro#tine set o$ problems in the "#ro5one with the primary p#rpose o$ a*oiding $acing #p to the *ery real problems that $ace the UK. +t is the UK that has the biggest de$icit in the 37. +t is the UK that is abo#t to s#$$er the e$$ects o$ the biggest ro#nd o$ spending c#ts $or o*er 7 years in$licted on a class that had *ery little to do with the ca#ses o$ the crisis by a political class hell bent on state red#ction $or ideological reasons. +t is also the UK that has the most #nbalanced economy o$ the maAor economiesD o*er reliance on the 0ity and the e7porting prowess o$ a bannana rep#blic. >e ha*e all been here be$ore. 0omplain abo#t this comment

    F?. At #:!0pm on 17 Sep 2010, :he;inger& wrote: So the story goes that we may need aC some o$ the clowns who got #s into this mess to get #s o#t o$ it B$or a*oidance o$ do#bt the 1F g#ysC and bC some o$ the e*en do5ier clowns who didn)t predict what was ob*io#s, a debt b#bble and criminally poor $inancial mar,et reg#lation, b#t now are $#ll o$ how to $i7 it B$or a*oidance o$ do#bt, assorted ran,s o$ economistsC. &he politically laced comments o$ the --0 correspondent doesn)t help $ill me with any con$idence that this blog amo#nts to a rather large and *ery *ery #n$#nny Ao,e. 0omplain abo#t this comment

    F5. At $:24pm on 17 Sep 2010, hea"th)toe wrote: 29 and 2:. 4bli*ion &han,s. -est posts on this blog. 0omplain abo#t this comment

    F;. At $:31pm on 17 Sep 2010, 5i'hard Ding"e wrote: &he hedge $#nds are not a ca#se o$ o#r problems more a sympton. &hin, o$ them as mere )economic p#ss)Balbeit complete with :11s and 2ole7esC.

    &he real wo#nd has long been ca#sed by g#tless politicians whose h#nger $or the trappings o$ power trampled all o*er any *ision or principles they may ha*e had. +n pole position we had 6ew Eabo#r who bored with the d#ll shadow o$ opposition Band the absence o$ per,s and ministerial limosC s#c,ed #p to middle "ngland and sold the nation a d#mmy in the $orm o$ a credit and property b#bble. &he principal architect, a $resh $aced rascal, was blessed with good timing and managed to hand o*er the shop to a 0l#mcey Scot A#st be$ore the wheels $ell o$$, b#t not be$ore he had managed to se7 #p his 0S $or the primary p#rpose o$ mar,eting his other acti*ities. 0o#ld)nt really ma,e it #p.

    0omplain abo#t this comment

    F7. At $:41pm on 17 Sep 2010, 5i'hard Ding"e wrote: 634 :he po"iti'a"") "a'ed 'omment of the --C 'orre pondent doe n<t he"p fi"" me with an) 'onfiden'e that thi *"og amount to a rather "arge and 4er) 4er) unfunn) ,o.e8 =o# co#ld say almost a... Ea$$er min#te. 0omplain abo#t this comment

    F9. At 11:1$pm on 17 Sep 2010, =a>/a> wrote: So#nds to me li,e e*eryone present at this e*ent does nothing o$ any *al#e to "#ropean society yet ponti$icates so elo'#ently abo#t what others sho#ld be doing. 0omplain abo#t this comment

    F:. At 11:31pm on 17 Sep 2010, 5o*ert Smart wrote: Sa*ing money to pay $#t#re pensions shows a $#ndamental mis#nderstanding o$ money. 4rdinary $ol, can mo*e wealth into the $#t#re thro#gh money, b#t that is a tric, that wor,s li,e this: >hen yo# p#t money in the money bo7 it red#ces the total amo#nt o$ money in circ#lation, ca#sing a minisc#le amo#nt o$ de$lation, increasing the *al#e o$ that money. &hen when yo# later ta,e money o#t o$ the money bo7 the *al#e gets into that money by ca#sing a minisc#le amo#nt o$ in$lation red#cing the *al#e o$ all the other circ#lating money. Society as a whole can)t do that. 3o*ernment does ha*e a d#ty to prepare $or a di$$ic#lt $#t#re by trying to mo*e wealth into the $#t#re. 1owe*er it does this by stoc,piling commodities Bli,e Qacob and the PharaohC and by b#ilding in$rastr#ct#re that will compensate $or possible problems Bli,e 6#clear Power in case o$ $ossil $#el shortageC. &he tro#ble with "#rope is that indi*id#al co#ntries are only a part o$ the m#ch bigger $inancial system. So it seems pla#sible that they can act li,e indi*id#als do. -#t that only wor,s i$ actions aren)t correlated. Since actions will be, and need to be, correlated and coordinated, the

    proAect o$ real wealth into the $#t#re thro#gh money is A#st a way o$ creating a $#t#re crisis. 0omplain abo#t this comment

    ? . At 11:40pm on 17 Sep 2010, %p2 nuff wrote: 5. 8t 2: 9pm on 17 Sep 2 1 , !empster wrote: 3i*en that the simplest answer is #s#ally the correct oneD that point is li,ley to be 5 < o$ 3!P. ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( 8ll in $a*o#r o$ ,eeping it simple. Seem to recall total UK ta7 ta,e has bo#nced aro#nd the F;< to ?5< brac,et $or decades, spending most o$ the last three decades #nder ? <. /emory co#ld be de$ecti*e so please $eel $ree to correct me. >hat has changed is the balance o$ the b#rden o$ that ta7 ta,e. +t has been p#shed down the income ladder. + ta,e yo#r point on incenti*eNdisincenti*e to wor, and agree to an e7tent. -#t that ass#mes the increase abo*e 5 < is permanent. 8gain, + seem to recall a co#ntry that tried that 1 < ta7 ta,e aro#nd the end o$ the second decade o$ the 2 th0. &hey managed to ,eep it going $or ;5 years, admittedly with the help o$ a maAor world war in the middle. + wo#ld ha*e co#ntered with the arg#ment that the maAority o$ the wor,$orce wor, not A#st $or money b#t o#t o$ commitment, engagement with what they do, the $#l$ilment wor, can bring b#t #n$ort#nately +)*e had that lo*ely notion almost ,noc,ed o#t o$ me o*er the last three years. People wo#ld not gi*e #p or emigrate to more $a*o#rable locations straight away. So, how m#ch wo#ld a temporary ( say, three years% ( ta7 hi,e to, say, 55<, with a massi*e increase on the higher paid bring in in de$icitZdebt e7p#nging terms% 8bo#t YF; bn% >o#ld it be worth selling it as temporary pain% 8nd what de$erred bene$its co#ld be dangled in $ront o$ the wor,$orce and other ta7payers% 0omplain abo#t this comment

    ?1. At 03:42am on 1# Sep 2010, ri'hard *unning wrote: 2#nning b#dgetary s#rpl#ses $or two generations wo#ld ta,e e*en more aggregate demand o#t o$ the economy, dri*ing down 3!P year on year, so red#cing the ta7 ta,e and increasing #nemployment and go*ernment wel$are spending ( i.e. it wo#ld in reality be sel$(de$eating. -#t contin#ing to raise the debt spiral is also not $easible as borrowing costs ta,e a larger and larger share o$ 3!P, lea*ing too little to $#nd p#blic ser*ices and social care. Karl /ar7 wo#ld be r#bbing his hands together in glee ( the #ltimate contradiction o$

    the process o$ e7traction o$ s#rpl#s *al#e has $inally come to pass A#st as he predicted, with the system #nable to cope with the *ast s#ms being remo*ed $rom the real economy e*ery year in the end creating an #nbearable weight o$ debt to be ser*iced that cannot be borne by today)s wor,$orce ( indeed tomorrow)s either, which has e$$ecti*ely be mortgaged by the c#rrent generation. &he ne7t part o$ the process will be the re*al#ation o$ monetary assets to re$lect what they are really worth. &his will mean the downrating o$ the national credit stat#s o$ many co#ntries and their c#rrencies. -inding "U nations together does mean the mar,et $aces an all(or(nothing sit#ation with the "#ro, b#t as we ha*e seen, e*en within "#roEand indi*id#al nations) ability to borrow can be se*erely c#rtailed and made a lot more e7pensi*e ( indeed many nations are close to being trapped between spiraling debt cost and red#cing their ability to generate s#rpl#ses to pay it, as c#tting their own spendi ng dri*es down their 3!Ps e*en lower. &he elephant in the room is not the "#ro ( it)s the totally debased dollar, which contin#es to be printed li,e con$etti and as the piles o$ dollars mo#nt, in the end its power as the world)s reser*eNtrading c#rrency will wane ( and as it does, the US8 will come $ace to $ace with reality as li*ing standards pl#mmet. /oney and money(related assets are going to get a lot more ris,y ( so are e'#ity in*estments dependent on $inancial acti*ity. Solid assets li,e land and reso#rces will increase in *al#e as the paper economy sel$(destr#cts ( this may ta,e decades to happen, b#t there is no way o#t o$ /ar7)s analysis that at some point the weight o$ debt and capital $ormation simply cannot be carried by the real economy and a meltdown point will arri*e. For the indi*id#al its call ban,r#ptcy, $or the company its called li'#idation, $or the nation it)s called so*ereign debt de$a#lt and $or the c#rrency its called hyperin$lation ( they are all $acets o$ the same longterm process that is the $inal irony o$ the mar,et e'#alising itsel$ ( to destroy the *al#e implied in money itsel$. /eanwhile the 0hinese 0omm#nist Party in -eiAing will be happy that they are ,eeping the $aith by harnessing capitalism to de*elop their means o$ prod#ction whilst they retain political control o*er the co#ntry and its people s#c,ing in in*estment, Aobs and technology $rom the de*eloped economies to position 0omm#nist 0hina to ha*e all the important cards in terms o$ reso#rces and capacity in place ready $or whate*er replaces the dollar based trading system when it $inally slips beneath the wa*es. >e on the otherhand are sitting on o#r hands and $ailing to ta,e the necessary steps to repatriate Aobs to the UK by applying an acti*e trade and ind#strial policy to deco#ple, deris, and consolidate o#r domestic economy $rom this global casino that is la#ghingly called @$ree trade@, which in reality is anything b#t @$ree@, in that it)s rigged and costs e*eryone in the UK a h#ge price in wel$are bene$its $or the #nemployed and to $#nd o#r indebtedness, personal, comm#nity, commercial and national. &he only way o#t o$ the debt trap is to end o#r dependence on imported goods and ser*ices and pay o#r way in the world. +$ that means import tarri$$s to restore competiti*eness o$ UK prod#ction, then so be it, b#t this needs to be done selecti*ely with bilateral and m#ltilateral agreements where there is m#t#al interest and balance

    in trade relationships. &hose h#ge container ships doc,ing e*ery wee, $rom 0hina m#st stop ( its as simple as that. &he idea that the hedge $#nd gamblers o$$er a sol#tion to shi$ting so*ereign debt is e7actly the same approach as saying the way o#t o$ my own personal debt is to ta,e what money that it le$t down the boo,ies and e7pect to bac, the right horse in e*ery race. -oo,ies $eed o$$ the del#sions o$ the rest o$ #s ( and we are del#ding o#rsel*es i$ we thin, hedge $#nds will do anything other than Aac, #p the cost o$ #sing them to the point where they control the le*el o$ ris, and they ma,e serio#s money whilst doing so. 0omplain abo#t this comment

    ?2. At 0#:!1am on 1# Sep 2010, Demp ter wrote: &o ? . 8t 11:? pm on 17 Sep 2 1 , Up2sn#$$ 8S+ rec,on ta7 $reedom day was 27th /ay in 2 :, and F th /ay in 2 1

    8S+ states: &a7 Freedom !ay answers the *ery basic '#estion: Ihow m#ch are -ritons act#ally paying $or go*ernment%H +t is calc#lated by comparing general go*ernment ta7 re*en#e with the 6et 6ational +ncome B66+C. &he total o$ all go*ernment ta7 re*en#e U direct and indirect ta7es, local ta7es and 6ational +ns#rance contrib#tions U is calc#lated as a percentage o$ 66+ at mar,et prices. &his year it comes to ? .: percent. &hat percentage is then con*erted to days o$ the year, starting $rom 1 Qan#ary. &he $irst day o$ the year that -ritons wor, $or themsel*es rather than the ta7man is &a7 Freedom !ay. 0omplain abo#t this comment

    ?F. At 0$:0!am on 1# Sep 2010, Shef"on.en wrote: &han,s $or yo#r insight into P++3S bond yields and the e7planation o$ the economic challenges $acing "#rope in the coming years and how we might pay $or them. +)m '#ite s#rprise that more o$ yo#r commenters aren)t interested in: ( 1.;< b#dget s#rpl#s, i.e. #s 2"8EE= paying $or o#r parents mista,es. ( &he clear e7planation o$ how bad borrowers o$ the world need in*estors who will accept a ris, o$ *olatile ret#rns Bloan shar,s, hedge $#nds etc.C 0omplain abo#t this comment

    ??. At 0$:13am on 1# Sep 2010, Shef"on.en wrote: 4n a $#rther note. +t is o$ten arg#ed that hedge $#nds gi*e a ser*ice to #s by saying @hey the emporer has no clothes@. +$ we)re saying that hedgies ,ic,ed o$$ this crisis by betting against spendthri$t go*ernments and national pop#lations, isn)t that rather li,e blaming the g#y who tells yo# yo#r ho#se is on $ire $or setting light to it% 0omplain abo#t this comment

    ?5. At 10:3!am on 1# Sep 2010, AnotherEngineer wrote: J?? e7cellent point also 17 hits the nail on the head. &here has been m#ch disc#ssion abo#t whether it wo#ld be a good idea $or hedge $#nds to sol*e the so*ereign debt mar,et problems. =o# co#ld arg#e that we sho#ld be grate$#l $or anyone to do it since the #s#al people seem incapable b#t + am s#re that someone will point o#t that that is what people tho#ght hen they elected 1itler Bby proportional representation + belie*eC. + s#ggest that this a $#tile arg#ment. +$ the hedge $#nd were entr#sted with the trillions o$ dollars to in*est long term in the so*ereign debt mar,et they wo#ld no longer be hedge $#ndsD they wo#ld ha*e morphed into money mar,et $#nds which are a completely di$$erent animal o$ which there are already many. &he whole point o$ a hedge $#nd is that it is small and agile so that it can ta,e opport#nities be$ore others notice them. 4$ co#rse they do not always get it right, li,e when they shorted S> the day be$ore Porsche made a ta,eo*er bid. 0omplain abo#t this comment

    ?;. At 10:41am on 1# Sep 2010, dontma.eawa4e wrote: ??. 8t ::1Fam on 19 Sep 2 1 , She$lon,en wrote: @4n a $#rther note. +t is o$ten arg#ed that hedge $#nds gi*e a ser*ice to #s by saying @hey the emperor has no clothes@. Some people had an in,ling that the trends in ho#sing were all wrong in the US8. >hy didn)t the powers that be see it% 1ere)s an e7tract $rom a piece + read abo#t Pa#lson, who made a ,illing betting against the trend i.e. 1edgingM:( For Pa#lson, it all boiled down to one chart which Pellegrini prod#ced showing the in$lation(adA#sted growth in ho#sing prices o*er time di*ided by wage growth. &he data clearly showed a rapid e7plosion #pward away $rom the general trend starting in 2 . 1e ass#med this trend wo#ld not contin#e inde$initely and re*ert Be*en o*ershootC. 1e was right. Perhaps we need a $ew e7(1edgies assisting the -o$"% 0omplain abo#t this comment

    ?7. At 10:!1am on 1# Sep 2010, %p2 nuff wrote: re J?2 3ood point. 8lways am#ses me that we now #se the 8merican ta7 year $or &a7 Freedom !ay. >hen + was a lad, be$ore the war ... etc., etc., it #sed to be 8#g#st or September somethingM &hin, this is beca#se it was an 8merican concept in the $irst place. &hey li,e their $reedom o*er there. -#t bac, to the plot: we are proposing to shi$t it to 1 Q#ly B5 4ctober in UK spea,C or e*en $#rther into the year. >o#ld it wor,% 1ow long wo#ld the UK wor,$orce b#y into it $or paying o$$ the

    de$icitZdebt% 8nd how long be$ore it had a negati*e e$$ect in terms o$ disincenti*e and o#tward migration% 8nd wo#ld it ma,e a signi$icant dent in that !Z! total% 8nd $inally, Bin 3ood 6ews at &en traditionC what wo#ld 3o*ernmental and $iscal li$e be li,e a$terwards% >o#ld we A#st go and ma,e the same mista,es all o*er again beca#se it was time $or a change in apathy or 3o*ernment or something ...% 0omplain abo#t this comment

    ?9. At 11:03am on 1# Sep 2010, %p2 nuff wrote: ?1. 8t F:?2am on 19 Sep 2 1 , richard b#nning wrote: 2#nning b#dgetary s#rpl#ses $or two generations wo#ld ta,e e*en more aggregate demand o#t o$ the economy, dri*ing down 3!P year on year, so red#cing the ta7 ta,e and increasing #nemployment and go*ernment wel$are spending ( i.e. it wo#ld in reality be sel$(de$eating. (((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( S#rely that depends on the si5e o$ the s#rpl#s% >hat abo#t a near balanced economy, ie a slight s#rpl#s or slight de$icit% >e also need to remember that, #ntil recently, we had a $alling birth rate. &his wo#ld normally ta,e care o$ the #nemployment sit#ation to an e7tent in a contin#al s#rpl#s sit#ation. 8nother tho#ght. >o#ld Karl)s glee not be lessened by renewable energy, P0s, mobile phones, to#rism, air tra*el, media, cars, etc LFractional 2eser*e -an,ing, + s#ggest mische*io#sly as another way o$ )ma,ing) moneyO all the things he co#ld not e*en dream o$ that ha*e come along $or #s to ma,e and sell and #se% &here co#ld be a shed more o$ these inno*ations to come along ... 8nd then there are still h#ngry, thirsty people aro#nd the world ... 0omplain abo#t this comment

    ?:. At 11:1#am on 1# Sep 2010, %p2 nuff wrote: 2- in J?1 )&he ne7t part o$ the process will be the re*al#ation o$ monetary assets to re$lect what they are really worth. &his will mean the downrating o$ the national credit stat#s o$ many co#ntries and their c#rrencies.) (((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( !oes that re*al#e a nation)s monetary assets% S#rely it A#st e7presses a *iew as to their percei*ed worth $or obtaining $#t#re debt and the possibility, increased or not, or de$a#lt on e7isting debt%

    -inding "U nations together does mean the mar,et $aces an all(or(nothing sit#ation with the "#ro, b#t as we ha*e seen, e*en within "#roEand indi*id#al nations) ability

    to borrow can be se*erely c#rtailed and made a lot more e7pensi*e ( indeed many nations are close to being trapped between spiraling debt cost and red#cing their ability to generate s#rpl#ses to pay it, as c#tting their own spendi ng dri*es down their 3!Ps e*en lower. (((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( + thin, + wo#ld want to introd#ce the word may be$ore )dri*es down their 3!P e*en lower.) "*ery now and then we ha*e debates abo#t economics on the three maAor -log sites and + ma,e the point that one o$ the di$$ic#lties both with economics and the present sit#ation is that what we thin, are the r#les and principles and what has happened in the past may not apply this time. + wo#ld de$initely agree with what yo# post i$ a 3o*ernment chose to s#ddenly c#t spending s#bstantially. =es, the economy wo#ld be li,ely to )go o*er a cli$$). +n o#r present sit#ation, &he 0oalition has gi*en notice. &he pri*ate sector has a meas#re o$ ad*ance warning. >hether it helps to smooth o#t the e$$ect that wo#ld normally be e7pected remains to be seen. 0omplain abo#t this comment

    5 . At 1:23pm on 1# Sep 2010, nautonier wrote: 1edge F#nds simply #se their bac, door access to the ban,s to borrow massi*e amo#nts o$ o#r money in order to gamble and spec#late ... p#rely $or the sa,e o$ creating e7tra winners and losers. 4$ co#rse, the hedge $#nds are better at spec#lating than the other players so they are normally the )winners) and ... 3#ess who the )losers) normally are% Pension F#nd managers $re'#ently lose o#t to hedge $#nd transactions ... b#t this is all hidden $rom o#r *iew in the morasse o$ secret globalised $inancial transactions. 3enerally, the hedge $#nd managers are the )boo,ma,ers) in global money and other mar,ets ... and i$ the ban,ers did not allow the hedge $#nds to gamble Band ha*e access to )o#r money) at the bac, doorC with o#r money and create these e7tra winners and losers ... there wo#ld not be any hedge $#nds and o#r pension might be doing a bit or indeed a lot better in some cases. &he go*ernment does not own any money ... all 3-P)s are held on tr#st $or the -ritish people by 1/ &reas#ry ... so when o#r e7change c#rrency *al#e has gone down 15( 2 < Bagainst most c#rrenciesC as it has in the last $ew years ... remeber that m#ch o$ this is d#e to o#r ban,s lending o#r money to hedge $#nds to spec#late against and de*al#e o#r c#rrency. &he politicians do not want #s to ,now this or appreciate this ... that is why they li,e #s all to b#y plenty o$ alchohol and pretend to be anti(dr#g #se% &he '#estion )do we need more hedge $#nds)% ... sho#ld really be ... )do we need any hedge $#nds at all)%

    &here has ne*er been a de$initi*e or reliable st#dy to show that -ritish citi5ens are in any way better o$$ by ha*ing e7pos#re to )hedge $#nds) ( + A#st tho#ght that + had better mention this as the --0 are probably not aware o$ this important $act. Finally, most o$ the hedge $#nd )pro$its)% >here do they go% ... /#ch o$ the pro$its go to gold b#llion ban, *a#lts in the 0ayman +slands, -eiAing, /onaco, -erm#da etc. 1edge F#nds stin, ... we do not need them .. and they are capable Bsome indi*id#allyC o$ crashing down the $inancial roo$ing on o#r heads and ta,ing #s all bac, to the )stone age). 0omplain abo#t this comment

    51. At 1:37pm on 1# Sep 2010, errrrrrrrrrm wrote: 1al$ a blog on hedge $#nds de*oted to s#pporting b#dget c#ts again, do the --0 Band StephanieC ha*e no shame% Q#st $or the record the the arg#ment isn)t @b#dget c#ts * stat#s '#o@, it)s @sa*age c#ts * moderate c#ts@. >hy do yo# insist on distorting the debateNarg#ments Band the people ma,ing themC again and again% +n all o$ "d -alls statements he ma,es it clear that he isn)t against b#dget c#ts, he simply belie*es a shallower red#ction in go*ernment spending is a sa$er approach. +t)s easy to distort a persons arg#ment by $oc#sing onNcreating a perception o$ a person rather than the act#al content o$ statements, which is e7actly what is being done here by saying @the $oc#s here is b#dget c#ts are good, "d -alls wo#ldn)t li,e it@ creating the impression that he is against b#dget c#ts as matter o$ $act, when the opposite is tr#e. -ac, to the blog itsel$, it seems contradictory, on the one hand e7tolling the *irt#e o$ b#dget c#ts, the main arg#ment in s#pport o$ which is that not sorting o#t the de$icit now will mean the mar,ets sh#n o#r bonds, and on the other hand saying the problems co#ntries li,e greece and ireland are ha*ing aren)t to do with ris, a*ersionNmar,et $orces b#t reg#lationNimage iss#es, something which the UK wo#ld ha*e to go o#t o$ it)s way to create gi*en o#r central role in world $inance. 0omplain abo#t this comment

    52. At 3:10pm on 1# Sep 2010, Am) m)the wrote: &his #sed to be an interesting blog,altho#gh + mostly read it to see the comments rather than the articles. +t did howe*er pro*ide a $oc#s $or a debate. Un$ort#nately these days it seems not to co*er the e*ents in the UK economy s#ch as in$lation and #nemployment on which we recei*ed $ig#res this wee,.+nstead it seems to in*ol*e attending lots o$ con$erences and $ollowing whate*er was disc#ssed there.+n that way it has dri$ted o$$ the s#bAect matter o$ economics and mo*ed more towards politics. 0omplain abo#t this comment

    5F. At 0:17pm on 1# Sep 2010, -o*5o'.et wrote: J52 8mysmythe, 4, 8my, here)s an economics '#estion, how do yo# price an asset % 0omplain abo#t this comment

    5?. At 7:32pm on 1# Sep 2010, mar.u _u. wrote: S#re Stephanie, "#rope, the UK, the world, we all need many many more hedge $#nds. >e all need to b#y and sell ho#ses, borrowing money $rom the /artians, dri*ing #p the ho#se prices, to $eed o#r ban,ers and to ,eep shopping and shopping in shops that employ millions and millions o$ low(s,ill wor,ers on minim#m pay, who then ta,e o#t mortgage a$ter mortgage and b#y and sell ho#ses and go shopping with what remains $rom the 125< loans and ne*er e*er prod#ce anything at all. =es Stephanie, yo# got it right, as #s#al. 8ll we need creditM 0omplain abo#t this comment

    55. At 7:3#pm on 1# Sep 2010, AnotherEngineer wrote: J5 6a#tonier wrote ... there wo#ld not be any hedge $#nds and o#r pension might be doing a bit or indeed a lot better in some cases. KKKKKKKKKKKK some pension $#nds in*est in hedge $#ndsD more sho#ld according to yo#r analysisM so when o#r e7change c#rrency *al#e has gone down 15(2 < Bagainst most c#rrenciesC as it has in the last $ew years ... remember that m#ch o$ this is d#e to o#r ban,s lending o#r money to hedge $#nds to spec#late against and de*al#e o#r c#rrency. KKKKKKKKKKKKKKKKKKKKKKKKKK >hat is the e*idence $or this% >ere they also responsible when the po#nd was worth two dollars not too long ago. 2emember that when the e7change rate changes it may the po#nd going down or the dollar #p or, most li,ely, a bit o$ each. =o# need to loo, at the rates against the "#ro and =en too. 8lso a low po#nd does bene$it some people e.g. e7porters and man#$act#rers competing against importers. &here has ne*er been a de$initi*e or reliable st#dy to show that -ritish citi5ens are in any way better o$$ by ha*ing e7pos#re to )hedge $#nds) KKKKKKKKKKKKKKKKKKKK 4r that they are not. +t is di$$ic#lt to see how this co#ld be done on any scienti$ic basis e.g. there are abo#t ; million -ritish citi5ens with di$$erent interests. 1owe*er, the $act that the French and 3ermans are against them is probably a cl#e. + do#bt that any hedge $#nd manager wo#ld ma,e this claim. Finally, most o$ the hedge $#nd )pro$its)% >here do they go% ... /#ch o$ the pro$its go to gold b#llion ban, *a#lts in the 0ayman +slands, -eiAing, /onaco, -erm#da etc.

    KKKKKKKKKKKKKKKKKKKKKKKKKKK normally 9 < go to the in*estors Bincl#ding pension $#ndsC and the other 2 < to the managers. &here has recently been contro*ersy abo#t whether they sho#ld be ta7ed as income or capital gains. + ha*e no partic#lar *iews abo#t hedge $#nds. &hey e7ist as long as they pro*ide higher ret#rns than a*erage to in*estors, otherwise the in*estors will as, $or their money bac,. 8pparently a n#mber ha*e closed recently ha*ing lost all the in*estors) money. 0omplain abo#t this comment

    5;. At 10:20pm on 1# Sep 2010, nautonier wrote: 55. 8t 7:F9pm on 19 Sep 2 1 , 8nother"ngineer wrote: J5 6a#tonier wrote ... there wo#ld not be any hedge $#nds and o#r pension might be doing a bit or indeed a lot better in some cases. KKKKKKKKKKKK some pension $#nds in*est in hedge $#ndsD more sho#ld according to yo#r analysisM ................ 8C that also in*ol*es the m#t#al $#nds ... the pension $#nds are ,eeping away $rom the hedge $#nds ha*ing lost hea*ily with o#r pension contrib#tions in recent years hence poor pension ret#rns on many pension in*estmentsN sectors in recent years so when o#r e7change c#rrency *al#e has gone down 15(2 < Bagainst most c#rrenciesC as it has in the last $ew years ... remember that m#ch o$ this is d#e to o#r ban,s lending o#r money to hedge $#nds to spec#late against and de*al#e o#r own c#rrency, in some transactionsNtrades. KKKKKKKKKKKKKKKKKKKKKKKKKK >hat is the e*idence $or this% >ere they also responsible when the po#nd was worth two dollars not too long ago. 2emember that when the e7change rate changes it may the po#nd going down or the dollar #p or, most li,ely, a bit o$ each. =o# need to loo, at the rates against the "#ro and =en too. 8lso a low po#nd does bene$it some people e.g. e7porters and man#$act#rers competing against importers. .................... 8C &he e*idence is in the $inancial press ... reams and reams o$ articles and data ... when -ritain had its ban,ing crisis B2 9C the nat#re o$ the mo*ement in Sterling showed that the hedge $#nds Band other $#nds were mo*ing money spec#lating on the priceC this tends to e7acerbate c#rrency mo*ements ... this is p#tting an e7tra element into mar,et o#tcomes ... and creating more ris, and more losers Be*en i$ we don)t ,now who these losers are or how m#ch they are losingC &he higher po#nd *al#e wo#ld also ha*e been in$l#enced by hedge $#nds and other spec#lators also. .......................

    &here has ne*er been a de$initi*e or reliable st#dy to show that -ritish citi5ens are in any way better o$$ by ha*ing e7pos#re to )hedge $#nds) KKKKKKKKKKKKKKKKKKKK 4r that they are not. +t is di$$ic#lt to see how this co#ld be done on any scienti$ic basis e.g. there are abo#t ; million -ritish citi5ens with di$$erent interests. 1owe*er, the $act that the French and 3ermans are against them is probably a cl#e. + do#bt that any hedge $#nd manager wo#ld ma,e this claim. ...................... =o# ma,e my point $or me ... the e$$ect o$ hedge $#nds is to create e7tra transactions ... i$ someone goes into a boo,ma,ers and places a bet ... they had a choice whether to do this ... when a ban, pro*ides o#r money to hedge $#nd managers and who then p#t it at ris, ... we ha*e not been cons#lted o*er the ris, to o#r money and o#r economy. &he point abo#t hedge $#nd Bin*estorsC is that the e7tra moment#m that they add to c#rrency mo*ements is not meas#red or '#anti$ied and as they win most o$ the time ... who are the losers% Finally, most o$ the hedge $#nd )pro$its)% >here do they go% ... /#ch o$ the pro$its go to gold b#llion ban, *a#lts in the 0ayman +slands, -eiAing, /onaco, -erm#da etc. KKKKKKKKKKKKKKKKKKKKKKKKKKK normally 9 < go to the in*estors Bincl#ding pension $#ndsC and the other 2 < to the managers. &here has recently been contro*ersy abo#t whether they sho#ld be ta7ed as income or capital gains. ....................... 8C &he pro$its made by hedge $#nd managers are someone else)s loss ... whether it be -ritish holiday ma,ers ... do yo# thin, the 9 N2 < pro$its go bac, into -ritish ban,s ... the point + made is where does this money go that is ta,en $rom the losers as incl#ding pension contract holders li,e mysel$ a$ter my ban,er has pro*ided money to hedge $#nds and my pension $#nd manager has also in*ested and lost ... most o$ the time. + ha*e no partic#lar *iews abo#t hedge $#nds. ......................... 8C -limey ... yo#)re not ,iddingM ........................ &hey e7ist as long as they pro*ide higher ret#rns than a*erage to in*estors, otherwise the in*estors will as, $or their money bac,. ......................... 8C &hey e7ist beca#se no one has tho#ght that we might be better sh#tting them down and)r ma,ing s#re their operations are transparent and properly reg#lated. F#ll or proper )&ransparency) wo#ld probably sh#t most i$ not all o$ them down anyway .............. 8pparently a n#mber ha*e closed recently ha*ing lost all the in*estors) money. ...............

    8C &hat is why they are an e7cessi*e ris, and parasitical and dangero#s and with regard to losing in*estors money ... the hedge $#nd gambling money is ta,en $rom di$$erent in*estors ... b#t $#nnily eno#gh those that p#t most at ris, as an in*estor ... that may incl#de my ban,er and pension pro*ider ... lending o#t my sa*ings and pension contrib#tions ... are the one)s getting the least o#t o$ the hedge $#nd transactions. 1edge $#nd operations are *ery dodgy and downright seedy ... are yo# getting the pict#re% /any iss#es here ... most pension and ban, acco#nt holders are #naware o$ the high ris, and dodgy delaings carried o#t by this rac,et and i$ pension companies were re'#ired by law to ris, rate their pension transactions and be transparent on their pension pro*ider)s acti*ities ... most wo#ld wish to trans$er their pension ... b#t with the lac, o$ in$ormation, transparency and tr#st ... there is no where sa$e to hold o#r monies whether at the ban, or in a pension ... beca#se m#ch o$ it get)s into the hands o$ the same *#lt#res and parasites. &han, yo# $or yo#r commentsM 0omplain abo#t this comment

    57. At 00:1#am on 1$ Sep 2010, 5o*in -ennie wrote: Stephanie, -alanced as e*er in yo#r analysis. 1owe*er, pension $#nds are more responsi*e to oppert#nities than yo#r article s#ggests. /ost are in the b#sieness o$ pro*iding long term *al#e and will accept short term ris, management i$ the analysis s#pports s#ch an approach Be*en rep#tational ris, will be ta,en into acco#nt as the managers will remain con$ident o$ e7plaining thier rational to thier clientsC. +$ potential reward o#tways the ris,s in see,ing s#ch reward then PFs sho#ld ta,e the @ris,@. 8s e*er the probabilty o$ ris, is not ade'#ately analyised by anyone it seems. 6amara 0omplain abo#t this comment

    59. At 00:!0am on 1$ Sep 2010, ri'hard *unning wrote: re: ?:. &here is something $#ndamentally di$$erent abo#t r#nning s#rpl#ses than $rom the traditional debate abo#t shi$ting the balance o$ o$ go*ernment b#dget acti*ity $rom ta7 c#ts to spending, or *ice *ersa. 2#nning a s#rpl#s ta,es money o#t o$ circ#lation completely. +t remo*es p#rchasing power $rom the go*ernment in the $irst instance, b#t then beca#se that money wo#ld

    ha*e circ#lated, passing $rom c#stomer to s#pplier #ntil it lodges bac, on deposit somewhere, the impact on the economy is to red#ce aggregate demand typically by ten times the *al#e o$ the s#rpl#s, that)s why the proposed c#t o$ Y1 -n translates into a red#ction in demand o$ Y 1 &n. &his is the mechanism that Keynes identi$ed as the main ca#se o$ the 1:F s sl#mp and led to the concept o$ demand management being the Aob o$ go*ernment to act co#nter(cyclically by r#nning s#rpl#ses d#ring booms and de$icits d#ring recessions. &here$ore i$ the go*ernment p#ts short term debt red#ction abo*e all else and ma,es a sharp red#ction in spending d#ring a recession or too soon coming o#t $rom one, this will be dramatically ampli$ied thro#gh the recessionary impact on aggregate demand and doing this in a s#stained way o*er the medi#m term is *ery li,ely to lead to the whole economy shrin,ing and stagnating $or a long time ( this happened in Qapan ( 12 years o$ a stagnant economy and $alling li*ing standards. /onetarists also accept the impact o$ red#cing the money s#pply is de$lationary and ad*ocate controlling it to p#t a bra,e on in$lation. >e are c#rrently both c#tting aggregate demand thro#gh the impending spending c#ts, b#t also r#nning a large increase in the s#pply o$ money *ia the -o" thro#gh P#anitati*e "asing Breplacing bonds and gilts with hard cashC and additional ban, lending, as well as by ta,ing maAor e'#ity sta,es in the ban,s, so rasing their core capital which is then lea*eraged thro#gh commercial ban, lending. &his combination wo#ld seem to o$$er a balancing e$$ect o*erall, b#t the ,ey iss#e is whether the pri*ate sector is able to e7ploit the hole le$t by c#tting p#blic spending to generate s#$$icient new Aobs and aggregate demand to s#stain the economy and ,eep it $rom going o*er the cli$$ into long term decline. !espite an e$$ecti*e negati*e base lending rate, the ban,s are now pricing in their ris, $actors and reb#ilding their balance sheets, so P" has had '#ite a m#ted e$$ect. +ndeed there is e*idence that the additional li'#idity is being #sed to dele*erage company debt and by spec#lators and hedge $#nds to ban,roll their commodity $#t#res trading, not Aobs and capacity. &he scale o$ the per$ormance re'#irement $rom the pri*ate sector is dramatic ( a 6"& increase in new Aobs o$ 2/Z as well as replacing the lost p#blic Aobs Bc. 1.2/C , in*estment in new capacity o$ c. Y? -n and an increase in e7ports o$ a third by the end o$ the parliament. BSee the 4-2 $orecast.C +$ these $ig#res are not met, the li,ely o#tcome will be to sim#ltaneo#sly increase go*ernment debt thro#gh $alling ta7 receipts and increased #nemployment wel$are payments, as well as creating a sharp recession in the whole economy thro#gh the impact on aggregate demand o$ r#nning the spending s#rpl#s. 8s we wo#ld then be between a roc, and a hard place ( i.e. #nable to a$$ord a debt( $inanced stim#l#s or grow o#r way o#t o$ the do#ble dip recession, there is a *ery real prospect o$ a longlasting depression setting in that wo#ld only be addressed thro#gh a large de*al#ation, which in t#rn wo#ld ris, triggering hyperin$lation, as the cost o$ imports wo#ld s,yroc,et. + simply do not see anyway that the pri*ate sector will get anywhere near these

    n#mbers, which by the way wo#ld re'#ire UK PE0 to o#tper$orm e*en the *ery best growth per$ormances o$ other co#ntries d#ring the boom years in the 9 s and : s. &hin, o$ a large le*er ( at one end the go*ernment mo*es it a relati*ely small way ( b#t at the other end this mo*ement is h#gely ampli$ied by the le*erage e$$ect applied ( that)s the e$$ect o$ r#nning a s#rpl#s on aggregate demand, so a s#rpl#s o$ 1.;< wo#ld e'#ate to 1;< red#ction in aggregate demand $lowing $rom go*ernment spending, which oNoNm e'#ates to 5 < o$ economic acti*ity, so a $all o$ 9< in 3!P seems *ery li,ely ( "ire)s 3!P $ell by 7.1< last year and #nemployment spi,ed when they $ollowed a *ery similar debt red#ction pac,age as is being proposed here. >hat Stephanie)s post raises is the idea that i$ hedge $#nds were to ta,e on a m#ch larger amo#nt o$ go*ernment debt rather than ban,s or pension $#nds, then this wo#ld red#ce the cost o$ ser*icing the debt thro#gh competiti*e price press#re, so creating a little more breathing space $or go*ernments to rebalance their debt and spending o*er a longer time, as they are less ris, a*erse than @normal@ $inancial instit#tions. +)d say go $or it ( hedge $#nds are pri*ate in*estment companies, not ban,s. 4nce they hold most o$ the debt, go*ernments will be able to restr#ct#re or e*en de$a#lt on their so*ereign debt witho#t the ris, o$ ta,ing down the ban,ing system ( those who li*e by the sword need to be prepared to die by itM 0omplain abo#t this comment

    5:. At 0$:47am on 1$ Sep 2010, 3*"i4ion wrote: richard b#nning 6ice one. 3reat post. + wonder, can hedge $#nds short themsel*es% +$ yes, they)d be indestr#ctible, no% D(C 0omplain abo#t this comment

    ; . At 10:!0am on 1$ Sep 2010, 5eaper_of_Sou" wrote: re J59 and what wo#ld happen with the s#rpl#s% +$ this were to be in*ested $or $#t#re gain Bi.e. act#ally in*ested not spentC it wo#ld A#st be li,e sa*ing more $or people)s pensions. +t always intrig#es me when people thin, borrowing to spend will generate growthD it needs to be e$$ecti*ely in*ested to achie*e real growth Brather than spec#lati*e b#bblesC. +$ we don)t in*est to pay $or o#r own $#t#re the wel$are state is nothing b#t a giant pon5i scheme which will ine*itably $ail. B+t was in many ways $#ndamentally $lawed, to maintain balance pension ages sho#ld

    ha*e mo*ed o*er time to ens#re time in wor,ing li$e and retirement remained in proportionC. 0omplain abo#t this comment

    ;1. At 10:!7am on 1$ Sep 2010, 5i'hard Ding"e wrote: 64$ 7888hedge fund are pri4ate in4e tment 'ompanie , not *an. 8 3n'e the) ho"d mo t of the de*t, go4ernment wi"" *e a*"e to re tru'ture or e4en defau"t on their o4ereign de*t without the ri . of ta.ing down the *an.ing ) tem ? tho e who "i4e *) the word need to *e prepared to die *) it@7 8 nice idea. -#t don)t hedge $#nds borrow $rom the ban,s Bas well as rich indi*id#alsC to ma7imise le*erage. 3i*en that the ban,ing system is still in the )reco*ery ward) s#ch a gambit might pro*e interesting. 7A imp") do not ee an)wa) that the pri4ate e'tor wi"" get an)where near the e num*er , whi'h *) the wa) wou"d reBuire %2 1LC to outperform e4en the 4er) *e t growth performan'e of other 'ountrie during the *oom )ear in the #0 and $0 8 master$#l display o$ #nderstatement. +t is debatable whether )e7cessi*e) B%C state spending in the last 1 years )crowded o#t) the pri*ate sector or was the only option gi*en the inability o$ the pri*ate sector to step #p to the plate. 4$ co#rse the pri*ate sector will protest that they are only held bac, by high ta7es and $aceless "U b#re#rcrats b#t they wo#ld wo#ldn)t theyD $#nny how these same "U b#rea#crats and an e*en higher ta7 b#rden don)t hold bac, the 3erman economy B2.2< 3!P growth in the last '#arterC ( b#t they do ha*e the ad*antage o$ a h#ge single c#rrency mar,et. 6o, a s#cces$#l pri*ate sector in this co#ntry is predicated by a re*amped ed#cation system, higher 2R! spend and consistent in*estment, as well as a c#lt#ral shi$t towards ma,ing high added *al#e arte$acts. 8ll this ta,es time which is in short s#pply. 1ence the role o$ the state. -y the way + am not a socialist. + belie*e in a thri*ing pri*ate sector Bwith social responsibility a,a )sta,e holder philosophy)C b#t alas + don)t see one on this side o$ the ditch. 8s $or the ban,s, the nations $a*o#rite whipping boy, what ha*e they really done wrong. &hey do what they always do and le*erage $inancial opport#nity. &hey pay their top people h#ge bon#ses b#t that is there b#siness and no one elses so long as they can a$$ord to do so. &his last bit is the cr#7 and ta,es #s to the bailo#t. &he ban,s co#ldnt belie*e their l#c, when go*ernments p#shed the mar,et to one side and bailed them o#t. &hat was the real tragedy o$ the last $ew years. &he real de$icit is not a money one, it is a political Nleadership one. 8 bra*e correct albeit #npop#lar political act wo#ld be to ta,e this co#ntry into the

    "#ro. 8 system where the pros $ar o#tweigh the cons. Prediction: &his co#ntry will Aoin the "#ro in the ne7t 5 years and not #nder a Eabo#r administration. Stanger things ha*e happenned. 8s $or economists, poor so#ls, what else can they do, teach % 0omplain abo#t this comment

    ;2. At 11:20am on 1$ Sep 2010, ri'hard *unning wrote: ; . &here wo#ldn)t be any s#rpl#s ( the whole amo#nt wo#ld be #sed to redeem e7isting debt ( so no ret#rn, no in*estment ( all it wo#ld do is to ret#rn a large amo#nt o$ money bac, to add to the 1U3" piles o$ capital already stac,ed aro#nd the world, loo,ing $or something to in*est in and ma,e a ret#rn. &he problem is not that there is too little capital a*ailable ( aro#nd the world there)s $ar too m#ch stac,ed #p in oil e7porting co#ntries) *a#lts and o$$shore ban,s, all loo,ing $or a ret#rn. >e created these h#ge piles o$ money thro#gh o#r trade de$icits thro#gh importing more goods than we e7port. >e need to stop letting money leach o#t o$ o#r domestic economy to enrich o*erseas go*ernments and companies and start reb#ilding o#r own ind#stries, b#t gi*en the rigged $oreign e7change mar,et B60hinaC and the rigged energy mar,et ( B6- 4P"0C there isn)t anything remotely resembling $ree trade going on, so we can)t compete. 4#r le*el o$ $ood and energy imports is #ns#stainable and the go*ernment needs to dri*e change towards renewable energy and to shi$t $ood policy away $rom ind#strial bee$ and chic,en prod#ction #sing imported grain that is abo#t to become #na$$ordable anyway. 8 s#pine approach based on libertarian dogma o$ @$ree mar,ets@ is p#re economic masochism ( we need to implement targeted import ta7es o*er three years and de*elop o#r ind#strial base, b#t that))s not what the 0on!ems are doing ( 0ameron is o$$ wandering aro#nd the world wittering on abo#t $ree mar,ets to people who play hardball by protecting their domestic ind#stries, 6- +ndia. &he only ray o$ hope is that 4bama gets really to#gh on the 0hinese c#rrency rigging operation, b#t thie r#ns the ris, o$ ending the game o$ the chinese getting economic growth by prod#cing goods to d#mp in western mar,ets in ret#rn $or tons o$ $reshly printed dollars that are hardly worth the paper they are printed on. 0omplain abo#t this comment

    ;F. At 11:!3am on 1$ Sep 2010, nautonier wrote: ;1. 8t 1 :57am on 1: Sep 2 1 , 2ichard !ingle wrote: J?:

    @...hedge $#nds are pri*ate in*estment companies, not ban,s. 4nce they hold most o$ the debt, go*ernments will be able to restr#ct#re or e*en de$a#lt on their so*ereign debt witho#t the ris, o$ ta,ing down the ban,ing system ( those who li*e by the sword need to be prepared to die by itM@ 8 nice idea. -#t don)t hedge $#nds borrow $rom the ban,s Bas well as rich indi*id#alsC to ma7imise le*erage. 3i*en that the ban,ing system is still in the )reco*ery ward) s#ch a gambit might pro*e interesting. ........................... So yo# rec,on that hedge F#nds only #se their in*estors) own pri*ate e'#ity in order to transact% 1a 1a 1a ... that)s a good one ... -arclays and others are, in e$$ect, )direct hedgies) ... are yo# trying to tell #s that -an,s always ,eep depositors) money separate $rom their hedge $#nd acti*ities% 1a 1a 1aM /y pension $#nd has #nit tr#st in*estment $#nds in hedge $#nds and + s#spect that it)s ordinary )do nothing) cash #nit tr#st is hea*ily in*ested in hedge $#nds as well. &he real answer is that hardly any persons o#tside o$ the hedge $#nd transaction ring ,nows what the balance o$ $#nding $or 1edge F#nds is beca#se 1edge F#nds are deliberately secreti*e and non(transaprent as they not intended to be within the p#blic insight and ,nowledge o$ ordinary ta7payers ... $or ob*io#s reasons ... as they are the preser*e o$ the e7tremely wealthy and e7ist solely to create s#rpl#s winners and losers as money ma,ing, ta7 a*oidance mechanisms $or those with direct interest in ta7 ha*ens and $amily tr#sts, 6on doms li,e e.g. some members o$ Parliament and some o$ those in the 1o#se o$ Eords. &ts called corr#ption ... transactions $or the sa,e o$ e7tra )winners and losers) and more )losers) than )winners)M Sast $alse pro$is do not emerge $rom nowhere ... they are other persons losses ... o$ten witho#t their ,nowledge, in*ol*ement and consent d#e to the massi*e seedy indirectNdirect e$$ects o$ hedge $#nds on e*erything that e7ists monetarily i.e. 3!P, in$lation, interest rates. 1edge $#nds a$$ect e*erything and + mean e*erything ... and e*ery penny in o#r poc,ets B$or those that ha*e some pennies le$tCM 0omplain abo#t this comment

    ;?. At 12:02pm on 1$ Sep 2010, 5i'hard Ding"e wrote: A upine approa'h *a ed on "i*ertarian dogma of 7free mar.et 7 i pure e'onomi' ma o'hi m ? we need to imp"ement targeted import ta>e o4er three )ear and de4e"op our indu tria" *a e, *ut that<< not what the ConDem are doing ? Cameron i off wandering around the wor"d wittering on a*out free mar.et to peop"e who p"a) hard*a"" *) prote'ting their dome ti' indu trie , 9- Andia8

    4ne o$ the things 0ameron is correct on )..wittering on abo#t $ree mar,ets..). )"7ternal world conditions) holding the UK bac, % Eoo, inside the UK not o#tside $or the answer. &hese same )e7ternals) a$$ect the 3erman economy b#t they still manage to signi$icantly increase mar,et penetration in the -2+0 economies. >hy, beca#se they ma,e '#ality goods that people need. +mport tari$$s will A#st increase in$lation, all things being e'#al. 0heap &Ss $rom the -2+0 #nderc#tting UK &Ss B+ #se &Ss as an e7ampleC sho#ld be sol*ed by the UK p#lling o#t o$ &S man#$act#re and replacing with high added *al#e prod#cts, that is the bea#ty o$ $ree trade. 0o#ntries at the lower end o$ the added *al#e greasy pole can implement tari$$s witho#t a net world economic lossD a co#ntry li,e the UK sho#ld not be in that position. &o p#t it bl#ntly what are we doing competing with the -2+0 co#ntriesD we sho#ld ha*e p#t o#rsel*es in the postion Bed#cation, 2R2, in*estnmentC o$ competing with the li,es o$ Qapan and 3ermany. &he UK sho#ld ha*e pioneered F! &S technology and then when that becomes commonplace hand it o*er to the -2+0S and then mo*e a notch #p the greasy pole B?! &S perhaps, get the pict#reC ( that is how it wor,s. &he idea o$ the UK imposing tari$$s is sad. Using the )added(*al#e greasy pole analogy) it is a,in to ,eeping yo#r position on the pole by ,ic,ing the g#y coming #p behind yo#. -eing at the bottom o$ said greasy pole is not the worst that happen. &he worst is not being on the pole at all ( the UK is heading in that direction and trade protectionism will accelerate the Ao#rney. 0omplain abo#t this comment

    ;5. At 12:07pm on 1$ Sep 2010, 5i'hard Ding"e wrote: 038 At 11:!3am on 1$ Sep 2010, nautonier wrote: 018 At 10:!7am on 1$ Sep 2010, 5i'hard Ding"e wrote: 4i 6a#tonier ( not my post. + wrote... @8 nice idea. -#t don)t hedge $#nds borrow $rom the ban,s Bas well as rich indi*id#alsC to ma7imise le*erage. 3i*en that the ban,ing system is still in the )reco*ery ward) s#ch a gambit might pro*e interesting.@

    0omplain abo#t this comment

    ;;. At 12:17pm on 1$ Sep 2010, nautonier wrote: ;5. 8t 12: 7pm on 1: Sep 2 1 , 2ichard !ingle wrote: ;F. 8t 11:5Fam on 1: Sep 2 1 , na#tonier wrote: ;1. 8t 1 :57am on 1: Sep 2 1 , 2ichard !ingle wrote: 4ops sorry ... )1err !ingle) 0omplain abo#t this comment

    ;7. At 7:10pm on 1$ Sep 2010, =orpheu wrote: 25. 8t 7:15pm on 17 Sep 2 1 , ,aybraes wrote: 3et +reland Port#gal and 3reece o#t o$ the "#ro,... +)d p#t it another way. 3reece, Port#gal, +reland. 3et o#t o$ the "#ro as soon as yo# can. >al, away and reb#ild M 0omplain abo#t this comment

    ;9. At 11:!1pm on 1$ Sep 2010, ri'hard *unning wrote: ;?. &he tripartite ind#strial model in 3ermany means that state in*ol*ement and partnership between the pri*ate sector and its wor,$orce has ens#red that 3erman ind#stry has been n#t#red and de*eloped with the right in*estment, the right wor,$orce and a strong domestic mar,et $or its prod#cts. 8s to imports tarri$ss in principle, +)d m#ch rather not ha*e them, b#t the state o$ o#r asset stripped, o$$shored and den#ded man#$act#ring base is so dire we now ha*e no choice b#t to create a walled garden to allow it to de*elop sa$e $rom o$$shore competition. >e need to s#bstit#te imports as rapidly as possible and accept that the cost to the cons#mer will rise, beca#se thae sel$(same cons#mer will then not ha*e to pay as a ta7payer to ,eep people on the dole and to $#nd the de$icit ( a price worth paying i$ it sol*es o#r de$icit problem. 5< increase in prices (b#t a 1 < c#t in the wel$are bill and ta7 ta,e ( -8238+6M 8s to yo#r opinion that the UK sho#ld be pioneering high technology, $ine, b#t + don)t see thsi happening ( we need to prod#ce what we cons#me and so ha*e a s#dtainable economy ( so we need to prod#ce bread and b#tter gods here.

    0omplain abo#t this comment

    ;:. At 0#:1#am on 20 Sep 2010, Sage_of_Cromerarrh wrote: 2+0182! and others, +$ we accept that we ha*e been li*ing beyond o#r means in terms o$ cons#mption, then de$lation o$ o#r economic b#bble is #na*oidable s#rely% >e m#st spend and cons#me less. &he ,ey is to manage this de$lation to ens#re we $acilitate an economic shi$t towards a s#stainable way o$ li$e and wor,. Key considerations m#st be the $ollowing: 1C !o and so#rce m#ch more locally. &his will red#ce o#r energy cons#mption, i$ properly organised, and pro*ide wor, in real Aobs locally. 2C 4nly go into debt $or in*estment in impro*ements and new inno*ations. FC 3o*ernments to thin, be$ore getting in*ol*ed in doing something whether it co#ldn)t be done by the pri*ate sector instead. 0ompetition and c#stomer power ,eeps pri*ate companies e$$icient and inno*ati*e. ?C !e$ence o$ the realm Bcon*entionally and n#clearC to be carried o#t in collaboration with near geographic and political allies in "#rope BFrance, 3ermany, -enel#7, Scadi, Spain etcC. 8$ter all we don)t serio#sly en*isage li$e with "#rope con'#ered and #s isolated on o#r little island $ortress as in 1:? do we% 5C +n*est p#blically and hea*ily in 2R! on de*eloping new energy so#rces and $ood prod#ction witho#t so m#ch energy and soil degredation. 8gain in cooperation with geographically close allies. ;C 2oll o#t an ed#cation program abo#t the dangers o$ o*er pop#lation and where it is ta,ing #s all with o#r ine*itable drop in '#ality o$ li$e. 2emo*e all $inancial s#pport $or parents $or children born on or a$ter 1 8#g#st 2 11. 0omplain abo#t this comment

    7 . At 0$:42am on 20 Sep 2010, 1uCC"ed=u hroom wrote: &hread is probably dead, b#t maybe someone can enlighten me% +$ it is tr#e that )go*ernments ha*e r#n o#t o$ long(term in*estors $rom which to borrow money), and are li,ely to t#rn to the hedge $#nds as lenders o$ last resort...and +$ it is tr#e that short(term in*estors need an #nstable mar,et in which to ma,e their gains% &hen, can)t + e7pect a rash o$ *al#ations and re(e*al#ations o$ bond yields and so*ereign debt @crises@ $rom the mo*ers and sha,ers%

    i.e. +s political destabilisation the price to pay $or getting short(term in*estors to pay $or p#blic spending% 4r is that where we already are...beca#se the traditional owners o$ bonds Bban,s%C got into bed with the short(termists and lost their shirts as well% +ts *ery dim in the m#shroom $arm today. 0omplain abo#t this comment

    71. At 10:00am on 20 Sep 2010, 1uCC"ed=u hroom wrote: 048 At 12:02pm on 1$ Sep 2010, 5i'hard Ding"e wrote: Amport tariff wi"" ,u t in'rea e inf"ation, a"" thing *eing eBua" 8. + tho#ght the rampant increase in money s#pply was what ca#sed in$lation. +mport tari$$s are A#st one o$ the $actors that will wa,e #s #p to the reality o$ it. KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK :he %2 hou"d ha4e pioneered 3D :D te'hno"og) and then when that *e'ome 'ommonp"a'e hand it o4er to the -5ACS and then mo4e a not'h up the grea ) po"e E4D :D perhap , get the pi'tureF ? that i how it wor. 8 8. =o# still seem to thin, e*er increasing growth in cons#merism and transporting st#$$ all o*er the world is a good way $orward $or the world. + tho#ght the 3reens had a lo#der *oice in 3ermany than that. +$ the sheep had not been dri*en down the lane o$ @bigger &Ss@ e*ery two years, some o$ them might not ha*e ma7ed o#t on their credit cards. 8nd some o$ the technological in*estment might ha*e been in s#stainable ecosystems, rather than @"spresso(ma,ers@ and indoor snow(domes. -esides which, as has been noted elsewhere, the high($lying +ndians or 0hinese are ed#cated to a higher technological le*el than the yo#th o$ -ritain. 1ardly p#ts #s at the $ore$ront o$ technology. 0omplain abo#t this comment

    72. At 10:37am on 20 Sep 2010, mr *"ogg 13'2 wrote: )&he e*ent was co(sponsored by the +/F and -r#egel, the respected "#ropean thin, tan,) So, Stephanie, what)s in it $or the +/F and the )respected "#ropean thin, tan,) >ho $#nds the )respected "#ropean thin, tan,)% >ho are its members% >ho $#nds the 3erman /arshall F#nd who ha*e concl#ded a strategic partnership with -r#egel. >ho $#nds them% >ho are their members and board members.

    >hats the membership o$ the +/F and *oting rights and who in$l#ences these. 0omplain abo#t this comment

    7F. At 11:4!am on 20 Sep 2010, Sage_of_Cromerarrh wrote: PUGGE"!/US1244/ + co#ldn)t agree more. &he world economy o$ the past generation or more has become a giant pyramid scheme b#ilt on largely #nnecessary and #nwise cons#mption. 8 decent &S sho#ld last $or 15 ( 2 years li,e they #sed to do. /odern electronics and E0!)s sho#ld be good $or many more years than an old 02&. >e seem so rel#ctant to wa,e #p and smell the co$$ee o$ reality. 0omplain abo#t this comment

    7?. At 12:00pm on 20 Sep 2010, Char"e (ur'i'h wrote: 7 P#55led/#shroom + ha*e one sol#tion which the -o" has already done... &he ban,s only b#y UK gilts i$ they thin, they can sell them on $or a pro$it. Selling them on is called the )secondary bond mar,et). &here is nothing pre*enting the -o" $rom p#rchasing the gilts on this mar,et ( the -o" ha*e already p#rchased abo#t Y2F -n in this way, so there is no real crisis here. +t also means that m#ch o$ this money e$$ecti*ely comes bac, to the go*ernment B+ thin,, tho#gh +)m not s#re abo#t thisC, which wo#ld mean the go*ernment is simply borrowing $rom itsel$ in the $#t#re. -#t then that)s what goes on e*en when gilts are p#rchased by say pension $#nds, as when $#t#re pensions starts to be spent into the economy, the go*ernment can raise ta7es to s#c, it bac, again ( macroeconomics does yo#r head inM "itherway, there is no need $or the UK to iss#e debt to )pay) $or its spending when it is a monopoly iss#er o$ its own c#rrency. +t sho#ld A#st iss#e eno#gh c#rrency itsel$ and spend this into the economy with no interest to pay and nothing to pay bac,. +$ there is too m#ch money in the economy, the go*ernment can simply ta7 more and b#rn the re*en#e. Kind 2egards 0harlie 0omplain abo#t this comment

    75. At 12:3$pm on 20 Sep 2010, forede'.da4e wrote:

    J;: Sage, /#ch o$ what yo ha*e written + agree with. 1owe*er, there are some other tho#ghts that i $eel need to be presented as well: @li*ing beyond o#r means@. &his o$ten trotted(o#t cliche is *ery rarely challenged. So perhaps we sho#ld ta,e a closer loo, and see what it really means. +$ yo# are meaning that we as a nation can no longer a$$ord to participate in globalisation whereby short term pro$it $or a $ew is only achie*ed at the strategic e7pense o$ the many then + totally conc#r. +$, howe*er, yo# mean that we m#st red#ce o#r standard o$ li*ing by $orgoeing the ,inds o$ ser*ices and $acilities o$ a ci*ilised society then + do not agree. @we m#st cons#me less@ +n what way% So#rce locally. See my comments regarding globalisation !ebt. "ssentially + agree. 1owe*er, whilst we change to local so#rcing and re(employ o#r pop#lation we need to borrow in order to s#stain o#rsel*es. Pri*ate Sector. + cannot share yo#r enth#siasm and con$idence here. &he *ast maAority o$ o#r S/"s $ail in comparison with their "#ropean co#nterparts on prod#cti*ity, o#r m#ltinats ha*e a long history o$ being di*orced $rom their home economy, and o#r #tility companies are maAorly in $oreign hands. >hilst e$$iciencies in o#r p#blic ser*ices are to be welcomed + cannot condone sacri$icing them to the alter o$ cost e$$iciency when e$$ecti*eness sho#ld be the watchword. !e$ence. + agree that we sho#ld stop )p#nching abo*e o#r weight). +t is time $or others to sho#lder the b#rden o$ international peace(,eeping. 1owe*er, the re*iew o$ o#r miltary needs $or the $#t#re sho#ld not be based p#rely #pon cost sa*ings. 2R! in*estment. agreed. &his cannot be le$t to the pri*ate sector. "d#cation. +t is essential that we create an ed#cation system that is )$it $or p#rpose) and places more emphasis #pon *ocational ed#cational *al#e. 4*er pop#lation is a world iss#e and cannot be recti$ied within o#r borders. -#t + totally disagree with yo#r last point. 0omplain abo#t this comment

    7;. At 1:14pm on 20 Sep 2010, Sage_of_Cromerarrh wrote: F42"!"0K!8S", +t seems we are in agreement on most points, e7cept #n$ort#nately the most important one abo#t ta,ing steps in o#r own co#ntry to do something abo#t o#r o*er(pop#lation. Eet me ta,e the points one at a time: >e agree on the o*er(globalisation aspect o$ o*er cons#mption. -#t ta,e a loo, in

    most peoples wardrobes at all the #nnecessary clothes and shoes worn once or twice. Eoo, at most ,ids #nwanted and #nplayed with toys. Eoo, at the miles dri*en per indi*id#al now in the UK compared with only a generation ago. 1ow old is tha a*erage person)s &S% 6ot to mention ready meals and ta,eaways *ers#s home coo,ed dinners etc. &he list is endless. /y point is that m#ch we cons#me does not enhance o#r '#ality o$ li$e it is o$ten merely a s#bstit#te $or o#r loss o$ comm#nity and relationships. 8ll bro#ght on by o*er pop#lation and o*er cons#mption and the o*er(riding economic ethos that material possessions and cons#mption are the be all and end all o$ a li$e well li*ed. So it)s what we de$ine as o#r standard o$ li*ing that co#nts. + wo#ld arg#e that more time to spend with $amily and $riends in an en*ironment not spoiled by o*er pop#lation and it)s associated poll#tion and cons#mption wo#ld be right at the top o$ my list o$ li$e '#alities. Eocal so#rcing will happen as the cost o$ transport escalates anyway and + don)t see the need $or a $actory to $eed the pop#lation with a new &S e*ery co#ple o$ years as being desirable whether it is located in 0hina or -irmingham. Pri*ate sector *ers#s p#blic sector. >e largely agree e7cept + wo#ld say that it is *irt#ally impossible to compete against the p#blic sector in b#siness. +$ pri*ate $irms do a poor Aob someone else can and will step in to ta,e their place. &his does not happen in the p#blic sector and engenders lethargy and a lac, o$ dynamism. &he e7ception is 2R! on long term proAects. 1ere + do agree that p#blic is de$initely best on this *ia o#r e7cellent world renowned #ni*ersities. Finally i$ we want to get serio#s on pop#lation we m#st stop state $#nding people to ha*e ,ids. +n partic#lar those that do it as a way o$ li$e and incomeNho#sing etc, and ha*e done $or generations, li*ing o$$ the state. +t ma,es no sense and propagates irresponsibiliy in parenting and creates h#ge problems $or #s all in o#r schools, o#r city centres, and o#r neighbo#rhoods. 0omplain abo#t this comment

    77. At 1:10pm on 20 Sep 2010, nautonier wrote: http:NNwww.b#sinesslin,.go*.#,NbdotgNactionNtari$$% r.l1K1 795?:1 FRr.l2K1 795?:1;9R$#rlnameKtari$$R$#rlparamKtari$$Rre$KRdomai nKwww.b#sinesslin,.go*.#, 2". +/P42& &82+FFS &he UK already has import tari$$s as can be seen $rom the abo*e web lin, ... the iss#e being that some o$ the tari$$s cost more to collect than the re*en#e recei*ed and the tari$$s themsel*es are sometimes years o#t o$ date and some co#ld be cancelled altogether $or partner $riendly co#ntries i.e. )o#r $riends) i$ we ha*e any le$t. &he sensible, care$#l and proper management o$ all tari$$s $or all UK imported and

    e7ported goods is long o*erd#e and can ma,e a h#ge di$$erence to the prospect o$ the UK maintaining e.g. reasonable o*erall li*ing standards and cretaing new Aobs and b#siness opport#nities. 8ll co#ntries ha*e them ... most co#ntries manage their import and e7port tari$$s m#ch better than we do in the UK. +$ any gi*en tari$$ is not )needed) ... then don)t charge it ... SimplesM =es ... + ,now ... o#r politicians are scared to do this as probably not allowed by the "U% 0omplain abo#t this comment

    79. At 2:04pm on 20 Sep 2010, Am) m)the wrote: &o reply to the '#estion + was as,ed in comment5F + thin, it wo#ld depend on the asset + g#ess. 1owe*er + do notice this in Stephanie)s post. "*en i$ an @asset manager has got an elaborate econometric model showing that Port#gal, say, is a good in*estment@ then the c#stomer will t#rn it down. >ell the way Port#g#ese bonds ha*e gone since Stephanie was at the seminar it wo#ld appear that the c#stomer was right and the seminar attendees wrong. 0omplain abo#t this comment

    7:. At 2:!7pm on 20 Sep 2010, forede'.da4e wrote: J7; Sage, @&his does not happen in the p#blic sector and engenders lethargy and a lac, o$ dynamism.@ + ha*e to disagree with yo#r comments regarding lethergy and dynanism. &he biggest problem across the sector is the reg#lations #nder which they are $orced to operate and the bea#rocratic nat#re o$ m#ch o$ the wor, that they ha*e to per$orm. Eet)s ta,e a classic e7ample ( Aob promotion inter*iews. >hy, when a s#itable candidate is a*ailable within the organisation does the Aob ha*e to be ad*ertised #ni*ersally and inter*iews #nderta,en% 6ow don)t tell me that this is the same in the pri*ate sectorM +t really isn)t the people. 0omplain abo#t this comment

    9 . At !:0!pm on 20 Sep 2010, (ohnCon ta*"e wrote: Stephanie mentions that "d -alls wo#ld ha*e hated it ( beca#se the concens#s o$ opinion $rom this +/FN-r#egel meeting is diametrically opposite to his *iew. "d -alls, as 3ordon -rowns chie$ technical ad*isor decided it wo#ld be a really good idea to remo*e )an anomaly) ( the ability o$ pension $#nd mangers to reclaim

    0orporation ta7 credits. "d -alls assisted 3ordon -rown in r#nning #p an additional Y? 2 2N7. -n de$icit between

    "d -alls and wi$e =*ette 0ooper had a bad e7perience when b#ying a home so when in 3o*ernment, they introd#ced 1+PS. Some might concl#de that "d -alls is dangero#sly cle*er. 0omplain abo#t this comment

    91. At !:10pm on 20 Sep 2010, 1uCC"ed=u hroom wrote: X 7?. 0harles Someone who #sed to post on here, b#t has been rather '#iet o$ late, said @Eoans are tomorrow)s earnings spent today.@ &hat ma,es a lot o$ sense to me. 6ow, as to gilts. Af they are as simple as they might be, the go*ernment writes a @promise to pay, n< per ann#m, and 1 < in m years) time.@ 8nd if the ban,s lend them money against that promise...it ass#mes two things:( 1. &he go*ernment doesn)t ha*e the cash today to co*er its proposed e7pendit#re, and 2. &he go*ernment belie*es that it will be able to $ind the cash to co*er the loan in 1 year)s time. [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[ Se*eral things seem ob*io#s $rom these two ass#mptions. 1. 8s e7ceptional, rather than normal beha*io#r, + can #nderstand, since s#ch a loan le*els o#t the b#mps in the road, and $acilitates in*estment in growth. 1owe*er, as normal beha*io#r, it seems #nwise to rely on borrowings to $inance day(to(day e7pendit#re. 2. "ither re'#ires the growth to materialise Btomorrow)s earningsC or else the go*ernment has to roll o*er the debt by ma,ing another promise to pay to raise the cash to pay o$$ the $irst loan. 6ow, the go*ernment can only raise the cash by itsel$ by r#nning a s#rpl#s o$ income o*er e7pendit#re o*er the li$e o$ the loan. 1ow it achie*es that, gi*en c#rrency $l#ct#ations, 0P+ changes etc. is complicated. -#t apart $rom @so*ereign de$a#lt@, the go*ernment /US& raise the promised repayment, in cash, on the d#e date. 1owe*er, i$ a go*ernment did manage to pay bac, its borrowings, and th#s not ha*e to pay interest, it wo#ld be s#bstantially better o$$ in cash terms, and co#ld increase its e7pendit#re on the day(to(day Bwel$areC by the amo#nt that it c#rrently pays in interest, witho#t ha*ing to raise any e7tra re*en#e. 8lternati*ely, it co#ld #se teh e7isting s#rpl#s to $#nd in*estment, e*en *ia a loan. &he ,ey iss#e is, the go*ernmnet /US& r#n a s#rpl#s to pay bac, its borrowings.

    &he -an,s, howe*er, in that sit#ation, wo#ld lose the n< per ann#m that they are collecting BindirectlyC $rom the ta7payer, and wo#ld ha*e to $ind someone else to borrow the money $rom them. 0onse'#ently, -an,s are probably *ery happy to lend money to the go*ernment, belie*ing that the go*ernment will ne*er miss a payment on their n< per ann#m. Unless + am mista,en, it wo#ld be a good thing $or the general pop#lation and a bad thing $or the -an,s i$ the 3o*ernment were not in debt. )&is a cons#mmation de*o#tly to be wished.) &here are two ways o$ rapidly #nra*elling this sit#ation. 3o*ernment s#rpl#s, or so*ereign de$a#lt. 3o*ernment s#rpl#s ,eeps the ban,s happy, and h#rts the people, b#t has a certain A#stice o$ @paybac, time@ $or the )li$estyle li*ed b#t not payed $or). So*ereign de$a#lt ,eeps the people happy Bsee 3ermanyC and h#rts the ban,s, b#t has a certain A#stice o$ @paybac, time@ $or the practice o$ )pro$iting $rom #s#ry). -etween this roc, and a hard place + $a*o#r $iscal policy which redistrib#tes the wealth in a more controlled manner B&obin ta7 or something *ery li,e it.C -ene$itting the care$#l and the pr#dent at the e7pense o$ the pro$iteers and $ec,less. +n m#shroom)s little #topia, it is not A#st the de$icit that has to be red#ced, b#t the debt, or else the ta7payers are ensla*ed to the ban,s $ore*er. [[[[[[[[[[[[[[[[[[[[[[[ 6ow, to yo#r $a*o#rite s#bAect o$ so*ereign money. !oes the -o" b#y gilts% >ith what money% +n what way did the -o" get the title to that money% +$ a loan is )tomorrows earnings spent today), then money in the ban, is )yesterdays earnings not yet spent). 8s a store o$ *al#e, yo# cannot simply print money witho#t tho#ght $or the *al#e it represents and the ownership o$ that *al#e. +$ all the so*ereign money in state @belongs@ to the state, then the -o" as a nationalised ban, is part o$ the 0omm#nist State 8pparat#s. B/ar7 did recommend nationalising the ban,sC. "*ery time yo# are paid in so*ereign po#nds yo# are paid by the state and can only spend that money in the state o#tlets. +t is a tr#c, shop. +$ howe*er, the *al#e represented by so*ereign money in the -o" belongs to those who )earned) it, then the go*ernment has no ob*io#s right to )nationalise) it and is restricted to borrowing $rom the deposits o$ indi*id#al in*estors and paying them bac, at agreed rates, li,e any other retail c#stomer. [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[ &his train o$ tho#gh has been bro#ght to yo# by what is sometimes disparagingly called /icawbernomics. /#shroom thin,s that go*ernment borrowing sho#ld be this simple, b#t will probably be enlightened by morning. 0omplain abo#t this comment

    92. At !:1#pm on 20 Sep 2010, 1uCC"ed=u hroom wrote: 7F. 8t 11:?5am on 2 Sep 2 1 , Sage\o$\0romerarrh wrote: >e seem so rel#ctant to wa,e #p and smell the co$$ee o$ reality. KKKKKKKKKKKKKKKKKKKKKKKKKKKKK Perhaps we did not b#y the latest, essential @>a,e(yo#(#p(and(smell(the(espresso@ machine. B+t was big, bright and green according to Simon and 3ar$#n,elC. 0omplain abo#t this comment

    9F. At !:3!pm on 20 Sep 2010, Sage_of_Cromerarrh wrote: 7: Foredec,da*e, + agree with what yo# say abo#t b#rocracy and the hamstringing e$$ect it has on organisations $#nded by p#blic money. &his is + thin, the main problem with the p#blic sector. &oo m#ch micromanagement $rom go*ernment tying pro$essionals #p in red tape. + agree it)s not the people it)s the c#lt#re created by ridic#lo#s le*els o$ acco#ntability. 1owe*er, when yo# don)t ha*e competitors to ,eep yo# in chec, yo# do #nder(per$orm, it)s h#man nat#re. 0omplain abo#t this comment

    9?. At !:43pm on 20 Sep 2010, Char"e (ur'i'h wrote: 4h !ear ( A#st listened to 6ic, 0legg)s speach. 1e)s con$#sing microeconomics and macroeconomics again Bhow embarassingC. 3o*ernment spending and iss#ing debt, is nothing li,e pri*ate ho#seholds or local go*ernment borrowing and spending. East time + chec,ed, ho#seholds N $irms N local go*ernments don)t iss#e their own c#rrencyM 0omplain abo#t this comment

    95. At 0:31pm on 20 Sep 2010, =orpheu wrote: 9?. 8t 5:?Fpm on 2 Sep 2 1 , 0harles Q#rcich 1i 0harles i)*e decided to stop banging on abo#t the del#sion. 6ot e*en the cle*er bods on here seem to get the distinction between 3o*t spending and iss#ing debt. +)m going to re(enter the /atri7 as /orphe#s and destroy it $rom within. 0omplain abo#t this comment

    9;. At 0:47pm on 20 Sep 2010, Char"e (ur'i'h wrote:

    91 P#55led/#shroom >ith regard to go*ernment )borrowing), my #nderstanding is that it is more correctly called iss#ing debt, and the reason $or this s#btle change in lang#age re$lects the $act that technically go*ernments do not need to borrow to spend. &he reason why go*ernment debt is re$erred to as @ris,($ree@ B'#ite legitamatelyC is beca#se i$ the go*ernment chose to, it co#ld simply create new money to pay this debt o$$. So why do go*ernments iss#e debt Y $or Y to match its de$icit% + #nderstand that it is act#ally the -o" that iss#es the debt in response to a b#dget de$icit, b#t it does so not to )$#nd) the spending, b#t to help it control its )target rate). F#rther, to maintain that rate, only a )part) o$ that de$icit needs to be matched by iss#ance o$ debt. &hat)s the only proper reason to iss#e debt, b#t the reason why they iss#e all the de$icit as debt is a hang(o*er $rom the )gold standard), and this Y $or Y debt iss#ance is no longer necessary and ma,es no sense. =o# as,ed how the -o" )payed) $or the gilts on the secondary bond mar,et. &hey created the money $rom nothing to pay $or it as part o$ P#antati*e "asing ( the 8mericans also #se this methodology. +$ yo# worry abo#t the $act that go*ernments )co#ld) iss#e their own money then consider this ( the -o" are #nelected and yet can create money at will ( ban,s are #nelected yet can create money when e*er they iss#e a loan to a c#stomer. &hese things are done #nder license $rom the go*ernment. +t does not ma,e sense to me that a ban, can create money, b#t its go*ernment, which gi*es it the permission to do this cannot. &his )gold standard) *ol#ntary constraint m#st be remo*ed in my *iew. 8s to the *al#e o$ money ( creating money only de*al#es a c#rrency slightly, and m#ch less than people thin,, and only relati*e to other c#rrencies. &his shows #p in 0P+ in$lation. +$ we li*ed in a world where de$icit spending by go*ernment happens mostly by creating money to spend Band only some debt iss#anceC, then it is ob*io#s that a go*ernment sho#ld not de$icit spend i$ in$lation goes abo*e say .5< o$ the in$lation target ( so that wo#ld be 2.5< $or e7ample, and abo*e F< the go*ernment might ha*e to contract the money s#pply. 0a#tion sho#ld be e7cercised in #nderstanding 0P+ beca#se S8& increases directly ca#se 0P+ to go #p. +$ yo# strip(o#t the S8& changes $rom o#r c#rrent F.1< 0P+ Bmeas#red by the 0P+= rateC then 0P+ wo#ld be A#st 1.?< at present. 6either this go*ernment, nor the last sho#ld ha*e p#t #p S8&, as it ties their hands with respect to increasing the money s#pply. + wo#ld lower S8& and p#mp new money into the bottom o$ the economy to increase aggregate demand. Kind 2egards 0harlie 0omplain abo#t this comment

    97. At 0:!2pm on 20 Sep 2010, =orpheu wrote:

    91. 8t 5:1;pm on 2 Sep 2 1 , P#55led/#shroom wrote: 6ow, as to gilts. +$ they are as simple as they might be, the go*ernment writes a @promise to pay, n< per ann#m, and 1 < in m years) time.@ 8nd i$ the ban,s lend them money against that promise...it ass#mes two things:( 1. &he go*ernment doesn)t ha*e the cash today to co*er its proposed e7pendit#re, and 2. &he go*ernment belie*es that it will be able to $ind the cash to co*er the loan in 1 year)s time. &here is a third ass#mption. &hat the 3o*t belie*es it cannot A#st create the money $or de$icit spending beca#se o$ the dangers o$ in$lation i$ too m#ch money is $loating aro#nd.. -#t who decides the reser*e re'#irements o$ the ban,s which directly a$$ects the le*el o$ money in the economy% So why pay ?< when it co#ld borrow $rom Eloyds or 2-S $or < % 0omplain abo#t this comment

    99. At 0:!7pm on 20 Sep 2010, %p2 nuff wrote: 9?. 8t 5:?Fpm on 2 Sep 2 1 , 0harles Q#rcich wrote: 4h !ear ( A#st listened to 6ic, 0legg)s speach. 1e)s con$#sing microeconomics and macroeconomics again Bhow embarassingC. 3o*ernment spending and iss#ing debt, is nothing li,e pri*ate ho#seholds or local go*ernment borrowing and spending. East time + chec,ed, ho#seholds N $irms N local go*ernments don)t iss#e their own c#rrencyM (((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( 0harles, /#st be the shoc, o$ being in 3o*ernment $or the $irst time in decades. !anny 8le7ander got into a m#ddle o*er ta7 e*asion and ta7 a*oidance yesterday. 8ny more tho#ghts on alternati*e ta7 systems% -est wishes, Sn#$$y 0omplain abo#t this comment

    9:. At 7:27pm on 20 Sep 2010, Char"e (ur'i'h wrote: 95 /orphe#s, 7+i Char"e i<4e de'ided to top *anging on a*out the de"u ion8 9ot e4en the '"e4er *od on here eem to get the di tin'tion *etween ;o4t pending and i uing de*t8 A<m going to re?enter the =atri> a =orpheu and de tro) it from within87

    3ood on yo# brother /orphe#s ( + ha*e $orgotten which pill is which, b#t + thin, we too, the right one. 0harlie 0omplain abo#t this comment

    : . At 7:27pm on 20 Sep 2010, %p2 nuff wrote: re J59 2ichard, &han,s $or the e7tensi*e post. 8gree to an e7tent. For e7ample: )+$ these $ig#res are not met, the li,ely o#tcome will be to sim#ltaneo#sly increase go*ernment debt thro#gh $alling ta7 receipts and increased #nemployment wel$are payments, as well as creating a sharp recession in the whole economy thro#gh the impact on aggregate demand o$ r#nning the spending s#rpl#s.) ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( >e are there now and ha*e been e*en in a time o$ #nprecedented prosperity. >ith the &U0 con$erence $inishing last wee,, it was the $irst time in thirteen years that they e7pressed s#bstantial concern o*er Aobs. =et we maintained 1.5m #nemployed $or most o$ those tirteen years and a whole lot more $or some o$ them. -#t the big '#estion is: are the 0oalition planning and e7pecting o#r economy to be in s#rpl#s in $i*e years% >e may ne*er reach that position in ten or $i$teen. Some people are saying that e*en with a helter s,elter c#t in 3o*ernment spending and borrowing together with ta7 rises, it wo#ld ta,e a generation to rid #s o$ the debt and de$icit and get #s bac, to s'#are one. )+ simply do not see anyway that the pri*ate sector will get anywhere near these n#mbers, which by the way wo#ld re'#ire UK PE0 to o#tper$orm e*en the *ery best growth per$ormances o$ other co#ntries d#ring the boom years in the 9 s and : s.) ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( 4n past record, agreed. &here are some di$$erences this time ro#nd, not least acc#m#lated e7perience o$ the 1:9 )s and early ): )s, greater wor,$orce $le7ibility, more entreprene#rial opport#nities, new technologies appearing constantly pl#s, perhaps, more $resh thin,ing in 3o*ernment. +nterestingly, the recessionsNdownt#rnsNsl#mps that occ#rred then were created or e7acerbated by the sitting 3o*ernment and had to be cleared #p by them. + do not #nderestimate the scale o$ the problem. +t is colossal. + await the 0onser*ati*e con$erence with interest to see what is in their mani$esto. &hat is, the one we did not see in 8prilM )+)d say go $or it ( hedge $#nds are pri*ate in*estment companies, not ban,s. 4nce they hold most o$ the debt, go*ernments will be able to restr#ct#re or e*en de$a#lt on their so*ereign debt witho#t the ris, o$ ta,ing down the ban,ing system ( those who li*e by the sword need to be prepared to die by itM) ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( 8greedM 832""!. 8ttracting in*estment capital is o$ten the one thing that holds bac, both new and established b#sinesses. 1edge $#nds are not the #s#al ones to

    pro*ide this, it wo#ld normally be *ent#re $#nds, along with the ban,s. -#t a goodly n#mber o$ people ha*e made shed loads o$ cash in the last thirteen years ( not A#st ban,ers ( and in*esting some o$ it in new and S/" b#siness sho#ld be tho#ght o$ almost as a patriotic d#ty. 0omplain abo#t this comment

    :1. At 7:33pm on 20 Sep 2010, %p2 nuff wrote: re J;1 1err !in,el, welcome bac,. =o#)*e been *ery '#iet $or a while. Some *ery good debates on the three main -logs in the last $ew days b#t things ha*e gone a bit downhill on 2P)s -log yesterdayNtoday with a b#ndle o$ ban,er bashing. yo# ha*e attrib#ted this to me at J?: ... ?: @...hedge $#nds are pri*ate in*estment companies, not ban,s. 4nce they hold most o$ the debt, go*ernments will be able to restr#ct#re or e*en de$a#lt on their so*ereign debt witho#t the ris, o$ ta,ing down the ban,ing system ( those who li*e by the sword need to be prepared to die by itM@ ... b#t + plead not g#ilty, altho#gh + agree with the $irst, partial sentenceM 0omplain abo#t this comment

    :2. At #:03pm on 20 Sep 2010, 5i'hard Ding"e wrote: $18 At 7:33pm on 20 Sep 2010, %p2 nuff wrote: 8pologies it sho#ld ha*e read J59 not J?:. 0omplain abo#t this comment

    :F. At #:0!pm on 20 Sep 2010, Char"e (ur'i'h wrote: 99 Up2Sn#$$, 7An) more thought on a"ternati4e ta> ) tem G7 + don)t ha*e strong *iews abo#t di$$erent systems o$ ta7ation per se, as ta7ation is mostly #sed to ta,e money o#t o$ the economy and to ind#ce a $low o$ money aro#nd the economy as e$$iciently as possible. 4$$ the top o$ my head, ta7es sho#ld be applied to n#mero#s parts o$ the economy, e*en i$ at low rates so that the go*ernment o$ the day has many ways to in$l#ence the $low o$ money to s#pport their p#blic p#rpose and control in$lation. 3o*ernments sho#ld be $ree to instit#te a wind$all ta7 on A#st abo#t anything i$ in$lation needs to be constrained, and s#ch ta7es need to be targetted BindirectlyC at the in$lating reso#rce N commodity or area o$ the economy. &his wo#ld not mean ta7ing the reso#rce itsel$, b#t ta7ing something which indirectly a$$ects its price.

    1and(in(hand with new laws which pre*ent essential reso#rces being #sed $or spec#lati*e gain. &a7es sho#ld always be targetted more at the rich than the poor beca#se money $lows $rom the bottom o$ the economy to the top, and it is #s#ally the rich who distort the economy Be.g. ho#se prices in r#ral areasC. + do thin, a &ransaction &a7 on the ban,s wo#ld be an e7cellent system, as well as a ta7 on empty residential properties. -oth wo#ld gi*e go*ernments s#bstantially more control o*er the economy + s#spect. Kind 2egards 0harlie 0omplain abo#t this comment

    :?. At #:40pm on 20 Sep 2010, 5i'hard Ding"e wrote: 7673 /e eem o re"u'tant to wa.e up and me"" the 'offee of rea"it)87 8 grip on )reality) and changing N ignoring h#man nat#re seem a strange combination. &he combination o$ inno*ation and $ree(trade are the best option we ha*e beca#se o$ the way we are. "*en those who choose the idyll o$ a cottage e7istence ma,e s#re they ha*e e*erything they want $irst Bban,ers ta,ing early retirement $or e7ampleC. &hose who are born into it cant wait to lea*e. &hen there is indi*id#al choice. +$ yo# want ,eep the same &S $or 15 years b#t dont $orce s#ch a policy on e*eryone else. +magine i$ anti(cons#merism too, hold s#ddenly. +t wo#ld lead to de$lation, mass #nemployment, protectionism and e*ent#aaly wars. 0hanging tac,, e*en i$ it is pro*en that cons#merism is )o$ the de*il) how wo#ld it be stopped. -y di,tat and comp#lsion. 1#man nat#re is the #ltimate )oil tan,er)D slowing it down and changing direction will ta,e probably Bbased on the last 15 million yearsC rather more time than we ha*e. Science, inno*ation and the )compariti*e ad*antage o$ trade) are the way to red#ce world po*erty and deal with the planets en*ironmental challenges. 0omplain abo#t this comment

    :5. At $:3$pm on 20 Sep 2010, &air fair wrote: Some historical conte7t : IFor at the same time $inancial dereg#lation was propelling a dramatic increase in

    credit($inanced cons#mer spendingH I8s a res#lt, the co#ntry is in an #ns#stainable position. +t is r#nning a chronic trade de$icit, $inanced increasingly by ban, lending.H I8ltho#gh -ritainHs ser*ice sector is held #p as the ind#stry o$ the $#t#re, world trade is still predominantly in man#$act#res.H I/an#$act#ring in*estment as a proportion o$ national o#tp#t had contin#ally $allen o*er the decade( intensi$ying a trend discernible since 1:; . Since then, -ritain has s#$$ered the largest $all o$ man#$act#ring employment o$ any ind#strialised co#ntry, and the switchbac, ride o$ the 1:9 s intensi$ied the rate o$ Aob loss.H I&he great s#rge in lending and borrowing that had characterised the 1:9 s came A#ddering to a haltH. IFor the 0onser*ati*e go*ernment re(elected in 1::2 $o#nd that the m#shrooming b#dget de$icit re'#ired drastic action.H B>hat happened to all the money $rom pri*atisation%C &his was written in 1::? by >ill 1#tton. + am a$raid that + m#st disagree with the idea that the pri*ate sector is e$$icient and the p#blic sector is ine$$icient. Some in both sectors are e$$icient and some are ine$$icient. 0ompetition does not g#arantee e$$iciency and some o$ the biggest and oldest pri*ate sector companies are *ery ine$$icient. 0omplain abo#t this comment

    :;. At 11:1!pm on 20 Sep 2010, ri'hard *unning wrote: 0legg)s speech did at least tell the tr#th abo#t some o$ the ,ey iss#es: @>e will ta,e ris,s in go*ernment. -#t we will ne*er lose o#r so#l. >e ha*en)t changed o#r liberal *al#es. 4#r stat#s is di$$erent b#t o#r ambition is the same.@ 1. 2+SK ( the planned c#ts will red#ce aggregate demand by 8 &2+EE+46 P4U6!S, whilst the go*ernment)s economic plan re'#ires at least 2mZ new pri*ate sector Aobs, Y? -nZ in*estment in -ritish ind#stry and o#r e7port growth #p by a third by the end o$ the parliament ( b#t i$ this target is missed all the c#ts, the Aob loses and the $all in li*ing standards will ha*e been $or nothing and o#r debt won)t $all, it will 3"& >42S". So witho#t any do#bt this is ris,(ta,ing on the grand scale, a h#ge gamble with all o#r $#t#res and those o$ o#r children. &he downside on the ris, is identi$ied by the 4"0!)s *iew that UK ho#se prices co#ld $all by o*er ? < and the &reas#ry)s lea,ed proAections o$ 1.2/ Aob loses in the p#blic sector alone ( add to that a r#n on the po#nd as the debt mo#nts ( say a ? < de*al#ation B6o "#roGone li$ebelt $or #s, we)re on o#r ownMC, pl#s a similar $all in 3!P that has happened in "ire where similar c#ts ha*e been made ( that)s an 9< ann#al 3!P $all in 2 :. >e end #p with 5/Z

    #nemployed, the Y5 litre o$ petrol and the Y2.5 loa$ o$ bread and the prospect o$ year( on(year $alls in li*ing stands. 2+SK%%% &his is 182!042" 38/-E+63M 2. @6"S"2 E4S" 4U2 S4UE@ ( no, that)s yo#r inalienable essence, that which those with s#pernat#ral belie$ claim ma,es #s spit#ral beings ( no, it)s yo#r /+6! yo#)*e lost ( how can anyone be prepared to see the 0on!em)s economic policy as anything other than as an act o$ Faith% &his is ideology, it)s libertarian claptrap not sane, rational economics. F. >" 18S"6)& 01863" 4U2 E+-"28E S8EU"S ( the Eib!ems ha*e always been a broad ch#rch o$ libertarians and social(progressi*es ( 0legg and his $ellow( tra*ellers hiAac,ed the Eib!ems and ha*er mo*ed their party $rom being to the le$t o$ 6ew Eabo#r to the ideoligical right o$ the wetest members o$ 0ameron)s one nation &ories. 0legg hasn)t changed ( he has simply dragged his party across the political spectr#m, $acing down internal dissenters. 8nd that)s e7actly what &ony -lair did with 6ew Eabo#r ( we)*e been sold the same p#p twiceM ?. 4U2 S&8&US /8= -" !+FF"2"6& -U& 4U2 8/-+&+46 +S &1" S8/" ( 8ltho#gh a tr#ism, 0legg isn)t an #neasy bed$ellow in the 0on!em coalition ( this is a coalition o$ the willing ( 0legg R 0ameron are tr#e belie*ers ( 0legg isn)t @doing the right thing $or the 0o#ntry@ thro#gh gritted teeth ( he)s a tr#e belie*er ( and his comment re*eals this plainly ( 0legg sees the coalition as the *ehicle $or his belie$s to be gi*en s#bstance and he is on the record as saying he belie*es in red#cing the si5e o$ the state ( so he is completely at home in a 0ameron 0abinet ( so /rs &hatcher)s acid test wo#ld see him as @one o$ #s@. 1is other rhetoric abo#t $airness is no do#bt heart$elt, b#t in tr#th we can clamp down on as many wor,shy bene$its cheats as we want ( b#t it)s all going to be pointless i$ there aren)t Aobs $or them to go to. >e can c#t the ta7 rates $or low income $amilies, b#t i$ yo#r income is so low yo# don)t pay ta7es anyway, it)s irrele*ant. 3o*ernment can slash and b#rn p#blic spending and ser*ices to c#t p#blic debt, b#t it)s pointless doing this i$ all it achie*es is to dri*e #p the le*el o$ pri*ate debt instead. 8s, anyone in*ol*ed in the c#rrent c#ts process and they will tell yo# that this is being done on an #nplanned, emergency basis that will see programmes that ha*e already inc#rred s#bstantial costs being binned ( the money spent is there$ore being wasted. &he 1.2/ p#blic sector Aobs being a7ed will all inc#r real red#ndancy costs ( the net sa*ing is there$ore only going to be abo#t Y2, per Aob in the $irst year, b#t we are then going to ha*e to pay these people to be #nemployed well into the $#t#re. >aste$#l, ideologically moti*ated *andalism p#re and simple. +)m not de$ending e*ery p#blic sector Aob or policy ( what + am criticising is the way this is being done that does not allow any $orm o$ responsible planning and b#dgeting on a reasonable timescale. &he enemy are not at the gates ( we are not abo#t to see o#r economy destroyed o*ernight ( there is scope to plan and manage correctly. 6ic, 0legg #ses the "#roGone crisis to A#sti$y his acceptance o$ the scale and pace o$ the c#ts we are abo#t to get in the 8#t#mn statement ( c#ts he p#blically opposed right #p to polling day then accepted b#t somehow $ailed to mention to the electorate at the time.

    4#r *erdict at the election was not a *ote $or the complete restr#ct#ring o$ the -ritish economy ( it was a loss o$ $aith in 3ordon -rown and an acceptance that 0ameron)s &ories had stopped being the 6asty Party ( and yes there was a lot o$ noise aro#nd the Eib!ems, b#t this did not translate into *otes $or them. &here is no electroal mandate $or what is happening ( Eabo#r R the Eib!ems both ran on an economic plat$orm o$ a slower pace o$ c#ts phased o*er a longer period. 0legg)s claim is now that there was an emergency and he has had to bac, 0ameron)s accelerated programme to sa*e the -ritish economy ( what will he say ne7t year i$ the economy has gone o$$ the cli$$% +)d s#ggest he boo,s a Eondon cab $or the day a$ter the ne7t election ( then he can hold the $irst meeting o$ the Parliamentary Eib!em Party in it on the way to >estminster, beca#se the $i*e seats Eondon cabs ha*e sho#ld be ample. 0omplain abo#t this comment

    :7. At 01:33am on 21 Sep 2010, Char"e (ur'i'h wrote: :; richard b#nning =es, yes, yes. +)m s#re we wo#ld disagree abo#t a good many details, b#t we are abo#t to learn how wrong this neoliberal e7periment isM + thin, that the UK economic reco*ery has been '#ite strong so $ar, so my optimistic g#ess wo#ld be 2.9/illion #nemployed by September 2 11, and F/illion by the end o$ 2 11. 1owe*er, i$ the c#ts ca#se a do#ble(dip, it might be m#ch worse than this, and F.5 million by the end o$ 2 11 is entirely possible. &ho#gh this wo#ld be a terrible thing, perhaps it wo#ld spell the end this neoliberal a#sterity r#bbish once and $or all Btho#gh the loss to the real economy, and peoples) li*es wo#ld be horrendo#sC. 3i*en that the U6 0ongress on &rade and !e*elopment BU60&8!C ha*e also e7pressed serio#s concern abo#t "#rope)s prediliction $or a#sterity Band this is bac,ed #p by a 2 ? page report based on empirical e*idenceC, + s#ggest a re*ol#tion in thin,ing will be at hand. Kind 2egards 0harlie 0omplain abo#t this comment

    :9. At 01:44am on 21 Sep 2010, Char"e (ur'i'h wrote: 8ll 6ic, 0legg needs is a red $ri55y wig, a red nose, and big pair o$ $loppy shoesM 0omplain abo#t this comment

    ::. At 07:3#am on 21 Sep 2010, 3* er4erin=onmouth wrote: 1ow can + get in to#ch with the --0 to enco#rage the p#blication o$ a thoro#gh analysis on +6FE8&+46% Partic#lalry how this coalition A#st li,e the labo#r party be$ore it are allowing rampant in$lation to e$$ecti*ely red#ce go*erment debt o*er the longer term as well o$ co#rse appearing to increase go*erment income as ta7es rise. /eanwhile in$lation erodes peoples sa*ings and real p#rchasing power whilst appearing to also red#ce personal debt. &hat is o$ co#rse #ntil !ear /er* is $orced to increase interest rates when in$lation really ta,es o$ and 0legg, 0ameron and co start to panicM PE"8S" E"&)S 18S" 8 !"-8&" 46 &1+S +SSU" 8S +&S 34+63 &4 -" &1" &44E 4F 014+0" US"! -= /4S& >"S&"26 34S"26/"6&SM 0omplain abo#t this comment

    . At 0#:17am on 21 Sep 2010, =orpheu wrote:

    ::. 8t 7:F9am on 21 Sep 2 1 , 4bser*erin/onmo#th wrote: PE"8S" E"&)S 18S" 8 !"-8&" 46 &1+S +SSU" 8S +&S 34+63 &4 -" &1" &44E 4F 014+0" US"! -= /4S& >"S&"26 34S"26/"6&SM + thin, yo# will $ind 3eo$$rey that >82 B>hat is it good $or% +ts good $or de$a#lting on yo#r c#rrencyC will be the tool o$ choice once the dollar goes belly #p. &he UK Gombies will once again go along $or the ride. 0omplain abo#t this comment

    1 1. At 0$:3$am on 21 Sep 2010, nautonier wrote: :?. 8t 9:? pm on 2 Sep 2 1 , 2ichard !ingle wrote: @J7F >e seem so rel#ctant to wa,e #p and smell the co$$ee o$ reality.@ 8 grip on )reality) and changing N ignoring h#man nat#re seem a strange combination. &he combination o$ inno*ation and $ree(trade .......................... 1err !ingle +t is a '#estion o$ timescale ... many wo#ld agree with yo#r inno*ation and $ree trade ideas b#t m#ch o$ -ritain and its wor,ers are not now able to compete ... and the '#estion is how to we arri*e at yo#r *ision o$ some $#t#re idealological UK economy. 8ll we)re getting is more and more globalisation and more and more -ritish people being written o$$ and dropping o#t o$ the mainstream economy ... !o yo# thin, that is acceptable% 4r li,e many on this blog ... !o yo# simply not care%

    &here is no inno*ation in -ritain beca#se the )inno*ators) generally do not wish to inno*ate in -ritain as there are no pro$it margins to be had and in some cases, the inno*ators pre$er e.g. pre$er more e7ploitati*e economies with less #nionised wor,$orces with less employment rights etc as the operating costs are cheaper. &hose li,e mysel$ are proposing a $i7 to this problem and to create b#siness margins as pre$ering b#sinesses based and operating in the UK...b#t this as well as new ed#cation systems will ta,e how many years $or impro*ements to be made% 1 years ... probably a minim#m o$ 2 years is my own most optimistic estimate ... be$ore -ritain can be reorganised to be properly globally competiti*e, able to pay $or itsel$ and with a rob#st and $#lly s#stainable domestic economy ... and some will say that this will ne*er happen and the UK will contin#e to )slide) 1a*e yo# got a $i7 or do yo# A#st pre$er the stat#s '#o% S#rely we ha*e to do more than A#st )smell the co$$ee)% &he reasons the ban,s are not lending is that b#sinesses, li,e the ban,s themsel*es do not generally see any new opport#nities and pro$it sit#ations in the -ritish economy. &he -ritish economy needs better pro$it margin scenarios $or b#sinesses or there will be soon be 5ero new ban, lending and 5ero new rein*estment in the )critical areas) o$ -ritish ind#stry. +$ it)s a case o$ )+)m allright Qac,) ... well )that)s allright Qac,) ... as we)*e already $ig#red that one o#t. +)*e no problem with )$ree trade) so long as it is )$air trade) ( the 19thN1:th 0ent#ry )sla*e trade) #sed to be described as )$ree trade) 0omplain abo#t this comment

    1 2. At 0$:!0am on 21 Sep 2010, =orpheu wrote: 1 1. 8t ::F:am on 21 Sep 2 1 , na#tonier wrote: &he reasons the ban,s are not lending is that b#sinesses, li,e the ban,s themsel*es do not generally see any new opport#nities and pro$it sit#ations in the -ritish economy. @Eies. 8ll Eies@ &here)s nothing wrong with the -rits) inno*ating. &hey are A#st too sensible to ta,e the rates being o$$ered and re$#se to then wor, their bac,sides o$$ to line the poc,ets o$ the /asters. So#nds '#ite sensible to me, Sailor -oy.

    0omplain abo#t this comment

    1 F. At 10:12am on 21 Sep 2010, nautonier wrote: 1 2. 8t ::5 am on 21 Sep 2 1 , /orphe#s wrote: 1 1. 8t ::F:am on 21 Sep 2 1 , na#tonier wrote: &he reasons the ban,s are not lending is that b#sinesses, li,e the ban,s themsel*es do not generally see any new opport#nities and pro$it sit#ations in the -ritish economy. @Eies. 8ll Eies@ &here)s nothing wrong with the -rits) inno*ating. &hey are A#st too sensible to ta,e the rates being o$$ered and re$#se to then wor, their bac,sides o$$ to line the poc,ets o$ the /asters. So#nds '#ite sensible to me, Sailor -oy. ......................................... +)m glad that yo# agree with me ... i$ the margins and pro$its are not there ... $or whate*er reason ... then they are not there. 6ow that ban,s are e*al#ating b#siness loan ris, more stringently ... the cost o$ borrowing is bo#nd to be higher thn it was in the silly money period o$ the $ew years leading #p to the credit cr#nch. &his isn)t saying that -ritish b#sinesses cannot or do not wish to inno*ate ... this is saying that the inno*ators and ban,s are ma,ing rational b#siness decisions in a b#siness en*ironment and economic conditions that are totally #ns#itable in terms o$ the necessary margins and *isible pro$its ... in a b#siness system that has been b#ilt on easy credit. &he UK economy is st#c, in a r#t witho#t the prospect o$ margins and pro$its ... the UK and its economy has to create new margins in the UK i$ it is to reco*er ... as )margins) and )pro$its) o*erseas now largely belong to others and non UK interests. + still propose a comprehensi*e and possibly comple7 regime o$ import and e7port credits and create these )margins) arti$icially $or UK based comapnies that are doing the right thing $or the UK economy ... e*en on A#st a temporary basis ... #ntil s#ch time as the UK economy ))rebalances and is able to compete internationally and s#stain its own domestic economy. &he main problems with doing this are that no one in UK go*t ,nows how to do this and the "U will bloc, the UK $rom doing this and o#r political class has alreday, generally sold it sel$ o#t to global *ested interests who will oppose this at e*ery stage. 0omplain abo#t this comment

    1 ?. At 10:1$am on 21 Sep 2010, =orpheu wrote: 1 F. 8t 1 :12am on 21 Sep 2 1 , na#tonier wrote: +)m glad that yo# agree with me ...

    % + too am glad that yo# agree with me. &he /atri7 m#st be destroyed. 0omplain abo#t this comment

    1 5. At 12:30pm on 21 Sep 2010, Sage_of_Cromerarrh wrote: :? 2ichard wrote )+magine i$ anti(cons#merism too, hold s#ddenly. +t wo#ld lead to de$lation, mass #nemployment, protectionism and e*ent#aaly wars.) 8ll the more reason to act now and manage the ine*itable. 0ons#merism has only ballooned to become the b#l, o$ o#r economy beca#se the basic commodities o$ li$e ha*e been arti$icially too cheap and combined with credit based on asset b#bbles ha*e gi*en the pop#lation p#rchasing power beyond s#stainability. Un$ort#nately we are in $or a sl#mp. -asic commodities will become m#ch more e7pensi*e and the go*ernment will try to a*oid this initially with e*er more p#mp priming BP"C to ,eep the economy based on cons#mption going. &his will $ail within a co#ple o$ years d#e to erosion o$ money)s p#rchasing power and e*ent#ally we will ha*e to $ace the m#sic o$ reshaping o#r economy. +t)s a shame that we don)t realise it now and start acting accordingly to mitigate the conse'#ences. >atch energy and $ood price in$lation $or a start, they will be the $irst indicator o$ the nat#re en$orced economic changes. Price rises o$ commodities in a sl#mp indicate something is *ery wrong with o#r economic model. &his isn)t a recession li,e the 9 )s and : )s or e*en the F )s. Keynesian economics only holds i$ yo# $irstly ha*e a s#rpl#s sit#ation in the good times Bwe didn)tC, and go*ernment spending in a downt#rn is being #sed to maintain real and s#stainable Aobs $or a$terwards Bit largely isn)tC. 0omplain abo#t this comment

    1 ;. At 12:3$pm on 21 Sep 2010, A"e>andro -oudouri wrote: =o#)re right in saying that hedge $#nds wo#ld be interested on 3ree, debt. +t)s a real bargain right now, especially i$ yo# see it $rom the @spec#lator)s@ point o$ *iew, $ree $rom reg#latory constraints. 8ltho#gh 3reece has se*eral '#arters o$ recession ahead o$ it, it)s slowly t#rning aro#nd in what will soon be a spectac#lar manner: on the c#rrent pace o$ re$orm, in F (F; months there wo#ld be a totally new operating model in place, not only generating a moderate b#dget s#rpl#s b#t creating growth thro#gh inno*ation. 8nd by abiding by the law. Since the real economy was in s#ch a bad shape in late 2 :, e*ery re$orm will be bringing bene$it. +$ it co#ld ha*e grown by ?< in the 2 s with corr#ption , b#rea#cracy, 1 million ci*il ser*ants etc, it can get bac, there a$ter it b#rns all the $at.8nd it will stay there ( F year bonds is a real hitM -elie*e in the 3ree,s: de$eat is not an option and they will $ight ban,r#ptcy with all their means to s#r*i*e.

    0omplain abo#t this comment

    1 7. At 1:11pm on 21 Sep 2010, A4erage,oe wrote: Steph, >hy no re$erence to pri*ate debt% &he $act is its way bigger than the go*ernment debt. +$ it wasn)t 3o*ernment)s co#ld raise ta7 le*els and be able to balance the boo,s. &he heart o$ the problem is the debt based monetary system. 0#tting go*ernment spending will not $i7 the problem, as !empster pointed o#t pre*io#sly, #nless pri*ate debt le*els rise e*en higher, and this is not loo,ing li,ely. &he only sol#tion to go*ernment debt is monetary re$orm and a mo*e to a debt $ree monetary system. 0omplain abo#t this comment

    1 9. At 1:!0pm on 21 Sep 2010, 1uCC"ed=u hroom wrote: X9;, 0harles, than, yo# $or trying to help me #nderstand. + don)t get it, b#t that is not yo#r $a#lt. See ne7t b#t one. JJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJJ X97. 8t ;:52pm on 2 Sep 2 1 , /orphe#s wrote: -#t who decides the reser*e re'#irements o$ the ban,s which directly a$$ects the le*el o$ money in the economy% KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK 8. -asel, allegedly. :C PS BWhere)s o#r Trots,yite, Where has he gone%C [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[ So why pay ?< when it co#ld borrow $rom Eloyds or 2-S $or < % KKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKKK Serio#sly, this is the bit + was st#mbling abo#t in the dar, o*er. P#ite apart $rom the iss#e o$ de*al#ation. !o Eoyds or 2-S @own@ the money that they lend, or is it on deposit $rom its real owners. =o# see, i$ ban, deposits are @yesterday)s earnings not yet spent@ then the people who earned the money ha*e a @title@ to its #se. &here$ore, i$ the ban,, on their *eha"f b#ys gilts, the people who earned the money which is now loaned to the go*ernment were promised a ret#rn on their deposits. +t doesn)t seem to me to matter m#ch whether that ban, is -o", 2-S, -arclays or &escoFinance. -#t it does p#55le me that 3ilts can be traded at more or less than their $ace *al#e. Probably beca#se + am new to all this, and don)t #nderstand the de*io#sness o$ the $inancier)s mind. PPS. Some good st#$$ in this thread. &han,s 0omplain abo#t this comment

    1 :. At 2:21pm on 21 Sep 2010, /o"fie1eter wrote:

    &han,s to brilliant inter*ention, economic disaster was a*oided and the b#bble is still ali*e and well: .....p#blic debt... pri*ate debt..... l#dicro#s ho#se prices..... no inno*ation ..... no man#$act#ring. -lame the ban,s. Perhaps they learnt in the long period when we had an #nstable c#rrency and #nstable interest rates that the only sa$e way to lend to people was $or ho#se p#rchase. >hate*er the reason, they are *ery rel#ctant to lend to a small man#$act#rer. +$ they do, it)ll be a drip $eed, eno#gh to stay ali*e and get into more debt, not eno#gh to grow and ma,e a pro$it. 6ow we own a co#ple o$ ban,s, co#ldn)t we p#sh them in a di$$erent direction, A#st a little. 6o, we always go bac, to the sell paper, print money, in$late ho#se prices, b#bblenomics. +t)s better to stic, to what we ,now best. 0omplain abo#t this comment

    11 . At 2:21pm on 21 Sep 2010, =orpheu wrote: 1 7. 8t 1:11pm on 21 Sep 2 1 , 8*erageAoe wrote: >hy no re$erence to pri*ate debt% 0orrect )4ne man)s pri*ate debt is a another ban,er)s Ferrari) &he calls are getting lo#der and the crac,s are starting to show. 0omplain abo#t this comment

    111. At 2:24pm on 21 Sep 2010, &ran'e 'a (one wrote: /y comment $rom the se*enteenth was reomo*ed $or $#rther consideration some $o#r days ago. /ay + en'#ire as to how m#ch consideration is re'#ired% 0omplain abo#t this comment

    112. At 2:30pm on 21 Sep 2010, Sage_of_Cromerarrh wrote: 1 7. 8*erageAoe: >hat is go*ernment debt% + thin, it is the collecti*e debt o$ all the UK citi5enry, and so no di$$erent to pri*ate debt. &he go*ernment a$ter all is o#r elected co#ncil o$ ministers so to spea,, spending money $or #s all as a collecti*e rather than as indi*id#als. 8m + right in stating that i$ the go*ernment wishes to spend #nder yo#r proposed system it prints and iss#es some money% &his money goes into the economy to be spent and th#s increases the total amo#nt o$ money in circ#lation B#nless the entity the

    go*ernment gi*es it to sa*es it #nder a mattress or somethingC. +$ go*ernment doesn)t ,eep an eye on the amo#nt o$ money in circ#lation the *al#e o$ each #nit o$ c#rrency becomes de*al#ed. So i$ the go*ernment is iss#ing more money than it is contin#o#sly ta,ing in and destroying then yo# get de*al#ation and price in$lation o$ goods. So i$ the go*ernment is spending more than it is ta,ing in thro#gh ta7ation then yo# still ha*e a problem o$ s#stainability in the economy, am + right% So what)s the di$$erence between interest bearing bonds and printing more money% "ither way i$ yo# r#n a contin#al de$icit yo# end #p with a problem o$ goods and ser*ices price in$lationN and e$$ecti*e c#rrency de*al#ation. + can see that with the interest bearing model we ha*e *ers#s printing debt $ree money that yo# may get into this bad sit#ation more '#ic,ly and is this yo#r point% 1owe*er, yo# still get into a bad sit#ation economically regardless o$ yo#r borrowing model i$ yo# simply spend on cons#mption that does not bring any new in*ention or e$$iciency impro*ement, and that yo# can)t more than ma,e #p $or with monies yo# recei*e $or whate*er goods and ser*ices yo# sell bac, on the world mar,etplace. P.S +)*e watched the >i5ard o$ 45 and other lin,s and this does not address this $#ndamental point + am raising. 0omplain abo#t this comment

    11F. At 3:13pm on 21 Sep 2010, =orpheu wrote: 112. 8t 2:F pm on 21 Sep 2 1 , Sage\o$\0romerarrh Same old arg#ment. Same old tosh. "ither the 3o*t has control o$ the -an,s 2eser*e 2e'#irements or it does not. +$ it does it can control them money s#pply by raising the reser*e re'#irements on pri*ate ban,s to control the money s#pply while printing or borrowing $rom lloyds at < to $inance de$icit spending +$ it does not, then we are no longer a so*erign nation. 0omplain abo#t this comment

    11?. At 3:3#pm on 21 Sep 2010, Char"e (ur'i'h wrote: 112 Sage, 0#rrency de*al#ation by itsel$ is A#st n#mbers going #p or down ( it only becomes rele*ant i$ it ca#ses high price in$lation and this wo#ld show #p in the 0P+ $ig#re. &he creation o$ money Bas + #nderstand itC will always ha*e to happen while price in$lation is low eno#gh to tolerate it ( that)s no di$$erent to now. +$ price in$lation is

    e7pected to get too high, the -o" attempts to restrict the s#pply o$ money Bthro#gh ban, lendingC by p#shing #p the interest ban,s need to pay bac, to the -o" on their lending, th#s p#shing #p the interest ordinary people pay on loans, th#s deterring them. 0oncl#sion: So whether it is the ban,s creating the money, or the go*ernment, price in$lation sho#ld always be a limiting $actor to go*ernment spending, regardless o$ the so#rce o$ the money. &ho#gh it depends on how this money is spent as to what e$$ect it has on price stability ( so it)s not a straight lin, between creating money and price in$lation ( it)s more complicated than that. &he price o$ the c#rrency on e7change mar,ets is not rele*ant itsel$, only when it contrib#tes intolerably to price in$lation. 2emember most other co#ntries are also increasing their money s#pply Bone way or anotherC on an ongoing basis, so the *al#e o$ the c#rrency relati*e to theirs is always in $l#7, and there$ore price in$lation is always in a state o$ $l#7 anyway. "ither way, price in$lation is no barrier to $#ll employment. &his is how + #nderstand it. Kind 2egards 0harlie 0omplain abo#t this comment

    115. At 4:4$pm on 21 Sep 2010, A4erage,oe wrote: ] 112. 8t 2:F pm on 21 Sep 2 1 , Sage\o$\0romerarrh wrote: 1 7. 8*erageAoe: >hat is go*ernment debt% + thin, it is the collecti*e debt o$ all the UK citi5enry, and so no di$$erent to pri*ate debt. &he go*ernment a$ter all is o#r elected co#ncil o$ ministers so to spea,, spending money $or #s all as a collecti*e rather than as indi*id#als. + agree, in $act all debt is in e$$ect citi5en debt, we sho#ld be loo,ing at the total not A#st go*ernment debt. 8m + right in stating that i$ the go*ernment wishes to spend #nder yo#r proposed system it prints and iss#es some money% &his money goes into the economy to be spent and th#s increases the total amo#nt o$ money in circ#lation B#nless the entity the go*ernment gi*es it to sa*es it #nder a mattress or somethingC. +$ go*ernment doesn)t ,eep an eye on the amo#nt o$ money in circ#lation the *al#e o$ each #nit o$ c#rrency becomes de*al#ed. So i$ the go*ernment is iss#ing more money than it is contin#o#sly ta,ing in and destroying then yo# get de*al#ation and price in$lation o$ goods. 0orrect. &he 3o*ernment wo#ld ta,e o*er the role $rom the $ractional reser*e ban,ing system Band F2- wo#ld be droppedC. &he di$$erence is that the state wo#ld ha*e direct control rather than a third party at present, who ha*e a di$$erent set o$

    obAecti*es, ie the more we loanNcreate the larger the pro$it. Fiscal responsibility wo#ld still be re'#ired, b#t at least only one so#rce wo#ld be to blame i$ they made a hash o$ it. So i$ the go*ernment is spending more than it is ta,ing in thro#gh ta7ation then yo# still ha*e a problem o$ s#stainability in the economy, am + right% 0orrect. -#t i$ pri*ate debt was lower then higher ta7ation co#ld be achie*ed to ma,e the boo,s balance. 8ppro7 Y15 - + belie*e So what)s the di$$erence between interest bearing bonds and printing more money% "ither way i$ yo# r#n a contin#al de$icit yo# end #p with a problem o$ goods and ser*ices price in$lationN and e$$ecti*e c#rrency de*al#ation. -eca#se it is cra5y $or a go*ernment to be paying interest, and a lot o$ it, on its own money. Pl#s, and this is the ,ey point, a debt based monetary system re'#ires to e7pand perpet#ally to ser*ice the debt, i$ it doesnHt yo# get de$a#lts and it collapses. 1owe*er, this constantly erodes the *al#e o$ the c#rrency, this is it achilese heal. 8 debt $ree system does not re'#ire perpet#al e7pansion. + can see that with the interest bearing model we ha*e *ers#s printing debt $ree money that yo# may get into this bad sit#ation more '#ic,ly and is this yo#r point% +tHs the perpet#al e7pansion iss#e thatHs the real problem, the debt A#st gets bigger all the time. So yo# are $aced with, hitting a debt limit, or $acing de$a#lt at some point Broc, and a hard placeC 1owe*er, yo# still get into a bad sit#ation economically regardless o$ yo#r borrowing model i$ yo# simply spend on cons#mption that does not bring any new in*ention or e$$iciency impro*ement, and that yo# can)t more than ma,e #p $or with monies yo# recei*e $or whate*er goods and ser*ices yo# sell bac, on the world mar,etplace. 8greed. 8 debt $ree system does not remo*e the need $or $iscal responsibility. 1owe*er, in a world o$ $inite reso#rces a monetary system that re'#ires perpet#al e7pansion and creates e*er increasing le*els o$ debt at the same time is simply not s#stainable. P.S +)*e watched the >i5ard o$ 45 and other lin,s and this does not address this $#ndamental point + am raising. 1ope$#lly its now a bit clearer. 0omplain abo#t this comment

    11;. At 0#:27am on 22 Sep 2010, %p2 nuff wrote: ::. 8t 7:F9am on 21 Sep 2 1 , 4bser*erin/onmo#th wrote: 1ow can + get in to#ch with the --0 to enco#rage the p#blication o$ a thoro#gh analysis on +6FE8&+46% Partic#lalry how this coalition A#st li,e the labo#r party be$ore it are allowing rampant in$lation to e$$ecti*ely red#ce go*erment debt o*er the longer term as well o$ co#rse appearing to increase go*erment income as ta7es rise. /eanwhile in$lation erodes peoples sa*ings and real p#rchasing power whilst appearing to also red#ce personal debt. &hat is o$ co#rse #ntil !ear /er* is $orced to

    increase interest rates when in$lation really ta,es o$ and 0legg, 0ameron and co start to panicM PE"8S" E"&)S 18S" 8 !"-8&" 46 &1+S +SSU" 8S +&S 34+63 &4 -" &1" &44E 4F 014+0" US"! -= /4S& >"S&"26 34S"26/"6&SM ((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((( + agree that in$lation is still a big #nde$eated enemy. +t was interesting how, in a time o$ o$$icial 2.5< in$lation Bb#t e*erything in the real world increasing in priceC ( when a s#pposedly low in$lation 0hancellorNP/ had a*eraged F< pa $or his Party)s time in o$$ice ( that some economists s#ddenly started to promote the idea that )de$lation is bad and in$lation is good). +t was s#ch a s#dden abo#t t#rn that Sn#$$y started to get s#spicio#s. -#t to answer yo#r '#estion. 4n the )shopping bag) $ront, the prod#cer o$ 2?)s )=o# and =o#rs) wo#ld be a good person. -#siness: s#ggest 2?)s Peter !ay Bhe o$ the gra*el tonesC )+n -#siness). &hen there is Stephanie Flanders and 2obert Peston, o$ co#rse. +$ yo# write a letter it may ha*e a bigger impact and may be seen by more people than an e(mail. +$ yo# don)t get any res#lt, yo# co#ld repeat the re'#est with a copy o$ yo#r letter going to the new head o$ 2?M

    You might also like