The advent of 24 hour news channels has led to the media creating a fresh conventional wisdom with every new day.
They started by highlighting the dangers of a double dip recession because the government would cut too fast and too deep. Now, that’s something which Ed Milliband doesn’t even believe if you give credence to his recent appearance on the Andrew Marr Programme.
When the media were airing the cuts too fast argument, I indicated that the danger facing the economy over the medium term would come from inflation.
When the media turned its fire on the danger of inflation, and called for interest rate rises, the dangers of which I had highlighted.
The next bandwagon to form came after the recent poor economic data
This provoked the media into another spasm of criticism and calls for something called a growth strategy. But in truth such economic stimulus on the demand side is not needed: the most recent inflation figures showed that inflation was far above the Bank Of England’s own target. Much of this demand is caused by supply side factors, such as the decline in the value of sterling and the rise in the price of oil, caused in part by the poor weather. But, according to Ian King, Business Editor of The Times, it is possible to break down this headline inflation figure even further, and that the measure which comes closest to measuring aggregate demand, core inflation, is at a thirteen year high. This figure is the part of the inflation figure which strips out the rise in the costs of getting goods to markets, such as the VAT rise and the rise in the price of oil. While this number is at a thirteen year high in Britain, its at almost zero in the United States, and other peer economies, which is why the US is having another round of stimulus and the UK is cutting.
This high level of demand in the economy shows that a demand side growth strategy, which is what the media are advocating, is not needed.
That demand is high in the economy is further endorsed by the latest retail sales figures, which also show an increase in demand.
A major problem at the moment is that whatever growth there has been in the economy is not achieving maximum value because of rising prices, but as the deficit falls, and the currency strenghtens, growth will be enhanced, as the pound a person spends buys more goods in the economy, allowing it to create more production, demand and eventually jobs. So in truth, the current government policy is the best growth strategy for the future, and the ‘growth strategy’ bandwagon is one Lib Dems of all persuasions need to avoid jumping on.
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“That demand is high in the economy is further endorsed by the latest retail sales figures, which also show an increase in demand.”
Isn’t there always some increase in retail sales in January? What are the year-on-year figures like?
“A major problem at the moment is that whatever growth there has been in the economy is not achieving maximum value because of rising prices, but as the deficit falls, and the currency strenghtens, growth will be enhanced, as the pound a person spends buys more goods in the economy, allowing it to create more production, demand and eventually jobs. ”
Not sure there is any evidence of any of this. GBP isn’t going to rise any time soon, QE still needs to be taken out of the equation, and the manufacturing sector, although growing, is still only about 12% of the economy.
There is a word missing from the article – housing.
For a very long time this country has had a load of house price inflation and banks in the big black hole where the economy should have been. Whilst rent-seeking was a more attractive option than labour for large parts of a generation, this might have been ok (if you happened to be a boomer). Now however houses are not running away giving people substantial unearned paper wealth, and indeed are a millstone for many.
I am quite open to the arguments in the article. I am even open to an argument that there is not a great deal of difference between -0.5% and +0.5%. But to ignore the housing market in all this surely stretches the point. We do need a strategy that involves more than pricing three generations out of housing.
To be fair David, I’m not sure any of the commentators calling for a ‘growth strategy’ are necessarily calling for demand-side efforts. There’s been plenty of talk around supply-side reforms that will lead to growth – the much-vaunted greening of the economy, for one.
thanks for the constructive points guys.
@ top of the league
sterling rose the day the budget has announced and has risen a bit since then…..and to be frank the uncertain weather and political sistuation in some oil sensitive nations has played a big part in the inflation rate.
manufacturing has been growing a bit because the comparative weakness of the currency, which contrinutes to inflation at home, makes our exports cheaper.
and I think that link bindicates that year on year retail sales are ok. you are right of ourse that a certain level of increase is to be expected in january.
@ duncan I dont disagree with a word of your post, treating housing as a social need =, rather than as simply a tool of economic growth is what is needed
@ adam
The media are calling for a growth strategy, i.e. for more to be done than is alreday being done, the greening of the economy, and tax cuts announced all ready are supply side meansures, and are alreay happening.
@ topofthe league
one of my links shows me arguing against further qe because it would cause further inflation, there hanst been QE sdince then
I truly and really hope things are going that well. I honestly don’t know enough about this to comment though.
By a demand side plan for growth you presumably mean more borrowing.
I hope we don’t need this, a supply side plan wouldn’t go amiss though. Some cutting red-tape, investment in infrastructure and tax reform wouldn’t go amiss I wager. Or am I barking up the wrong tree again?
@ jayu
ed milliband seems to agree
@ stephen W
the cuts in corpo tax, and indeed the tax of the poorest out of the tax net, is tax reform.
as for cutting red tape, thats somehting I would certainly favour.
I cant think of any other way to put demand into the economy without more borrowing, and thats one oif the reasons I am against more borrowing
@David Thorpe
Really David? Could you point me to any statement where Ed Miliband has come out in support of the government’s growth strategy? You see, that is the problem that has been identified by many economists and industrialist, the fact that the government do not have a credible growth strategy. They may have growth policies, but they are not integrated, and appear to be not thought through thoroughly.
@ jayu
as highlighted in the article
ed milliband said on television he doesnt believe government policy will lead to a double dip recession.
as for growth strateegies, labours pla to cut by an average of twenty percent across all departments compared to the coalitions nineteen percen indiactes he would have cut deeper, his support form spending items such as ID cards and trident, which do nothing for gorwth, and have been cut by us, indiactes he hasnt got growth startegy of his own, and since he and ed balls were key brown advisors in the government which bankrupted britian, Im not all that keen on him backing what we are doing,
And here was me thinking this was supposed to be a sensible discussion.
@David Thorpe
I’ll give you some credit – you’re persistent.
Unfortunately, this is more bunkum from start to finish.
If I can follow your argument, it goes something like this:
– Further UK economic stimulus is not needed because the inflation figure is far above the BoE’s target.
– The decline in the value of sterling and the rise in the price of oil, is behind this
– You can measure aggregate demand with core inflation
– Because this figure is next to zero in the US, the US is having another round of stimulus and the UK is cutting.
– Thus demand is not needed, because demand will save us all.
– Rising prices mask Growth
– But as the deficit falls, and the currency strengthens, growth will be enhanced
– So Gideon has been right all along.
Firstly, you’re out of date. Obama announced cuts of 8% in US Federal spending yesterday.
Secondly, today King has hinted he will raise interest rates within 3 months.
Thirdly, the UK’s trade deficit grew last month. Why is this relevant? It is the only strategy Gideon advocates for raising GDP. If the deficit is growing – how is the UK going to become an export-led economy?
Fourth, the retail figures show only short-term data. I think you only read the headline. Jan was up 9% year-on-year? And? Jan 10 had the weather we had in Dec 10 – so the increase is more than likely false. Plus, after the Dec we had, every retailer was keyed up for a large January. But as inflation gets steadily higher; wage inflation stalls; unemployment continues to rise; house prices fall
Fifth, you are making huge leaps of faith here. You are trying to argue your case to prove your Coalition is right rather than find evidence to support it. The media are not arguing for Growth. It is their job to question Governments. The Coalition is doing a God-Awful job of building confidence through advocating growth because, like you, it has gone inwards and is interested only in justifying itself.
You keep writing these pieces to keep saying that Osborne is right. If you can find me one serious, impartial commentator who subscribes to your view that everything is just hunky-dory and we may as well start buying the Maserati’s that are due to us once The Great Gamble pays off, I’ll accept there may be a different view to the prevailing one. You and your Coalition are making it up as you go along.
@ David Thorpe
I would hazard a guess you haven’t studied economics much. Saying we have high inflation and therefore high demand and that therefore the economy doesn’t need any more help isn’t really a good way of analysing things. The inflation we have is cost driven inflation – oil, wheat, taxes, other imports. Strip out inflation from Money GDP and you are left with real GDP i.e. the volume of output and this is not in good state at all.
Demand, in (simplified) Keynesian analysis is made up of consumer spending (C) + investment (I) + Government Spending (G) + Exports (X) minus Imports (M).
The fundamental problem is Labour has used debt to fuel C + G and left us with a heck of a lot of M, and not much X or I.
Yet idiotically they are saying what we need is even more consumer and government spending, all based on debt, having signally failed to create any conditions for growth in the rest of the economy.
The problem is to get X and I growing. Cuse says it can’t be done. Well if it can’t be done, we should shut up shop and emigrate. It HAS to be done because there aren’t any alternatives. This is where Labour really failed and why they should be holding their heads in shame.
What really enrages me is when they say “Oh, it was a global recession. It hit everyone”. Well it did, but look at Germany. It is now booming, as are lots of other economies. Germany has a deficit of 3.5% against our 11%, so it is not about spending masses of money. The fact is, the Germans managed their economy well and Labour in the UK didn’t. They can lie and twist and spin all they like, but the mess they made over 13 years in reducing our productive capacity to the state it is in now is there for all to see. That is the problem we are grappling with: how to create long-term, sustainable, private sector growth, not debt-fuelled candy floss growth.
I believe we will see real growth, but it simply can’t come from internal consumer demand or from the government. The good news is that partner economies like Germany, the Netherlands, France and the US, as well as the BRICs are mostly booming. Exports HAVE been booming (up 17% in a year) but so have imports. This will not continue.
Consumer spending in the UK is going to be clobbered for the next two years at least by declining real wages, higher taxes and pessimism about unemployment. This is not to blame it on the government. It HAS to happen. We have been living beyond our means and this is payback time. The balance of payments being the difference between two very large numbers, it is likely to swing into surplus because M (all those imported consumer goodies) simply won’t be affordable.
As for Investment, it will recover if all of the current business surveys are correct, but only slowly and probably not as fast as the coalition government hopes.
So basically we are going to see a couple of years at least of maximum two per cent growth. There will be no return to the fake Labour boom years and precious little feel-good factor due to the debt overhang.
@Robert C
You misquote me Robert.
I’m not saying it can’t be done. I’m saying it is the Coalition’s only strategy, and as the trade deficit is growing, it needs to be supplemented by something – a Growth Strategy. However, to say there is no alternative is not only false – it is dangerous. Every single major global economy is competing to export. The Coalition simply saying “We will export our way back to growth” without understanding how to make it happen is our problem.
You are right to point to Germany and France as models of Growth – but entirely wrong to just throw blame at Labour for this imbalance. Productive capacity has been shrinking largely since Thatcher. You may not want to face that – but it is true. Our exports are largely service based – to say they’re booming misses the point of why trade is in deficit.
Interesting piece David. Actually if you are right it is very bad news. It suggests that, in spite of all that unemployment, there is very little spare capacity in the economy. No doubt because this isn’t just a temporary dip but a process of restructuring to deal with a changed world, and away from an unbalanced economy. And there isn’t much the government can do, except to stop making things worse by stoking up aggregate demand.
The more I think about it, the biggest supply side reform we need is in banking and finance – we need to give the small and medium sized companies, who will innovate the most, access to more finance at reasonable cost. Our big banks are too interested in either investment banking megaprofits, or in mass produced products that don’t require them to know their customers. No wonder investment remains low.
@ matthew
first of all, yes we certainly do need massive reform of the banking and finance sector, plus
I think of the accountancy and law sectors, hoepfully some of this will happen.
@ Cuse
I dont think osborne is right abotu everything, indeed at leats some of this picem and the last poiece I wrote on this site criticise he and the lib dems.
This piece is a criticism of the fact that some lib dems, and some tories have embraced the 24 hour news cycle culture and scrambled around to talk abotu growth strategies.
As for my persistence, I was writing about the dangers of a rise in inflation long ago, when most of my critics on this site were saying I was mad.
The UK does have a growth strategy, which involves turning demand into growth, because at the moment, the level of demand, as measured by the consumer price index, and by the rate of core inflation, is high, but growth wasnt there in the last quarter, it was however there in the quarter before hand.
@ Robert C,
Thanks for the reply, I agree with most of what your saying, but you do oversimplify what Im sayiong a bit, I do not claim that because we have high inflation therefore we have high demand, the headline of my piece should indicate that.
Im sayiong because we have high consumer spending, and because we have a very high rate of core inflation, we have high demand.
you point oput that exports and imports have been booming, which is correct, and they have been booming, at leats partly, because of the cheap pound making exports cheaper, but this of course makes imports dearer.
reducing the deficit will make sterling stronger, which will make exports more expensive, but imports cheaper.
This realiigns demand somewhat, and may succeed in the short term, but the longer term challenge is for britian not to have to rely quite so much on imports.
@ cuse
America has undergone stimulus much more recently than britian has, because it needed it, and while you highlight his 8bn of cuts, you dont mention what he is doing to aggregate spendiong, i.e. what he is doing to stimulate the ecvonomy, are they net cuts oir gross cuts.
@Matthew Green
The article confuses imported price inflation with high real demand. They are not the same thing.
We have huge spare raw capacity in terms of unemployment at the moment, but there is a huge lack of skills and employability meaning our effective labour force is much smaller than unemployment figures suggest. There is also a huge lack of private sector capital investment that would soak up that labour force. Any growth plan needs to focus urgently on spending money to get people off the dole queues and into real jobs, compelling them to take on training and improve their education. It also needs to encourage business to invest. This can be achieved by giving a stable and predictable business environment – which includes not letting the public finances go to hell in a handcart as Labour would want with their opposition to any cuts at all.
@ David Thorpe
*Until now* we have had high demand, mainly because consumers have been able to put their heads in the sand due to much lower interest rates cutting their mortgage rates.
That is no longer the case, and with falling real wages, the prospect of high unemployment and higher interest rates, consumer demand will at best be flat, if not declining. The figures you quoted for retail sales were for January, which included the first four days with the pre-VAT rush. Since then, things have been much worse and they will remain that way.
The future we have in this country as far as consumer demand is concerned will be a replica of the German situation in past decade. Sluggish or no growth in consumer spending. The only growth Germany had for a very long while was export driven. They had to pay for the costs of reunification. We will have to pay for the costs of our overspending in the 1990s and 2000s. Germany faced a long hard slog then, and the UK does now.
@ Cuse
‘The Coalition simply saying “We will export our way back to growth” without understanding how to make it happen is our problem.’
But the coalition DOES understand how to make that happen – encouraging private investment. All the main business organisations support the deficit reduction plan as a key means of ensuring stability. They have committed to spending on training and supporting private sector investment, as well as infrastructure, despite having to sort out the huge deficit at the same time. The problem is that the economy is so addicted to infusions of public cash that redirecting it to private sector growth is going to take a long, long time, particularly outside London and the South East where virtually no private sector jobs were created, even during the boom.
Labour spent money on public sector vanity projects with little use, like “B of the Bang” and the “Angel of the North” a well as vast numbers of underused art galleries and museums and regional development agencies with expensive offices and high paid bureaucrats who achieved very little, while turning a blind eye to an explosion in claims for housing benefit and a culture of worklessness. This is because it won it easy votes in its inner city Northern constituencies without posing any difficult political problems.
If it had spent that money encouraging private companies in depressed regions to invest in jobs and training and had paid for core infrastructure instead of frittering it away on useless stuff then we would not be in the position we are in now. In economic terms, Labour’s strategy was “all fur coat and no knickers”.
@ robert
Im not confusing imported price inflation with high demand.
The entire purpose of the piece osi to make the exact opposite point.
That demand is high can be shown by the consumer spending figures, which I linked to, and the core inflation figures which I linked to.
Imported price inflation is the reason this high level of demand is not producing, or didnt in the last qurater anywatyt, high growth.
I really dont understand how you can think I confused inflation and demand, when I emphasised so many times the exact opposyhuite point.
@
matthew
thanks for the reply.
I think the spare capacity will come as the imported price inflation eases, menaing that people will have the same incoem inititally but as inflation falls it will go further.
@ matthew
tyhe seocnd part of your post, about the need to encourage spending and investment among the private sector, I agree with, and indeed one of the links I provided in the blog is to a piece I wrote a while ago for this site, highlighting tge dangers of trying to combat inflation with an interest rate rise, and the fact is I think that would be dangerous for just the reasons you say.
@David Thorpe.
Genuinely, I find your writing confusing and your logic extraordinary.
Have you considered the massive contradictions evident in your piece – those being that by firstly criticising the media for ‘forming a bandwago’n based on just one quarter’s poor GDP figures; that you then using positive retail sales figures for one month only (and that month’s figures being highly questionable) to claim “demand is high” when most serious economists are saying “demand is just about to fall off a cliff” may be a poor justification? Robert C’s analysis of where demand is heading is entirely accurate.
And because I’m an awful pedant – don’t claim Lib Dem credit for ‘cutting’ Trident. Cameron quashed that little LDV rumour just last week.
@ David Thorpe
“That demand is high can be shown by the consumer spending figures, which I linked to, and the core inflation figures which I linked to.”
Real demand growth is NOT high, only inflation.
The January figures for retail sales you quote were a blip caused by the pre-VAT rush, affecting the beginning of the month only. Inflation is being caused by supply side factors (import prices and taxes), NOT high demand.
The most recent official figures for retail sales for December show this really clearly.
h ttp://www.statistics.gov.uk/pdfdir/rs0111.pdf
Real demand (i.e. the volume of goods bought, taking away the effects of rising prices) has now stopped growing. There is ZERO growth year on year. This is as it should be with falling real take home pay, because otherwise consumers can only fund growing spending by going even further into debt. Unfortunate, but the maths make it unavoidable.
@ Cuse
The ONS GDP figures were distorted by at least 0.5 percentage points by the weather, according to the ONS itself. If you look at all the business survey data. which is usually very reliable, the economy is still growing, but only slowly. Unfortunately, this is inevitable and does nothing to justify Labour’s state of complete denial re the need for cuts. Slow growth now is merely the price we will have to pay for the imbalances built up while deceiving ourselves for so long under Blair and Brown.
@Robert C
The economy, notwithstanding the weather, stalled at zero growth in the last quarter according to the ONS. It has been little reported – but Germany + France shared identical weather to us yet reported Growth in the same period. The Coalition seems to be unwilling to mention this. I wonder why…
I disagree with you on your assertion that Labour are in denial of the need for cuts. This isn’t backed up by the Coalition’s position – which is “Labour would have done this anyway”. The Lib Dems can’t claim the economic high ground when they keep peddling this basic contradiction. Nor do I understand why, after some solid economic argument put forward by you, you feel the need to keep attacking Labour.
This isn’t Labour’s problem anymore. It is the Coalition’s. The public is rapidly turning away from the constant calls of “blame Labour” from the Coalition – the Lib Dems need to realise that blaming Labour is not an answer to the question “how do you fix the economy”.
” cuse
accoridng to the IFS four fifths of the recent retarction of the economy in the UK was due to the weather.
Im using retail sales figures, plus the core inflation figure to try to get an indictaion on demand.
” robert C
tHher is nothingw rong with slow growth, if you can keep inflation low, indeed thats what happened in germany for many years, and when it was happening then, many other economies such as the british and the irish, seemed to be powering ahead,
but the reality of course was different.
I HAVE PROVIDED A LINK TO RETAIL FIGURES FOR JANUARY.
” CUSE
i DONT BANDWAGON JUMP, MY POSITION HAS BEEN consistent across many months, I was highloighting inflation as a danger when no one else was, and was vindicated.
@David Thorpe
I am further confused.
I asked: “Have you considered the contradictions in your piece”. You still haven’t. You’re comparing apples with pears to justify bananas.
What have the IFS got to do with it? How can you say the IFS justifies your position?
Its why proper qualified economists don’t do what you’ve attempted to do – use 1 month of extremely specific figures to justify a National political + economic strategy. All economists agree – Demand is falling off a cliff. You seem reticent to accept that – because of 1 month of (easy to explain) numbers in one very specific economic segment that you are determined to insist support a specious economic experiment.
This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
FDR, 1933
Labour’s mess, Labour’s mess, Labour’s mess, big Greek deficit monster, etc
UK Coalition, 2011
How about restricting yourselves to talking about the need to re-balance the economy and describing where the growth and jobs required to take us forward will come from? Or, you could keep blaming labour and looking backwards in which case you will (a) talk the economy down (b) invite the electorate to take a look at the Lib Dem record over the previous term – they will realise that it doesn’t stand up to scrutiny (given the 2005 manifesto, lib dem policies of the time, etc, didn’t contain anything that said the government needed to change taxes/spending and start running a surplus.
” the ifs report high;lighted the weathers impact on the economy, which is somehting you raised, npot me, although I acknowledge the reality that it did.
as for your jib about proper qualified economists……many of thsoe write in newspapers and jhave been getting it wrong…
and you have no idea what my qualifications are or are not
@Robert C
The maquette of the Angel of the North is owned by Gateshead Council and is worth around a million quid. According to the council, it’s worth more than the total money spent on 50 pieces of public art over 25 years (which were mostly funded through the lottery):
http://www.gateshead.gov.uk/Council%20and%20Democracy/news/News%20Articles/Angel%20is%20one%20in%20a%20million.aspx
So the result was a financial gain to the council, as well as the raising of the profile of the Borough and giving people some interesting things to look at. I’m sure there are good examples of waste out there, but I don’t think that’s one of them.
@David Thorpe
I am genuinely trying to understand your thesis, not criticise your qualifications. The comment on economists was aimed at all so-called experts who endlessly justify their political preferences through dodgy economics.
Your thesis was based on one supposition: Demand is strong therefore the economy will be fine.
There is not a single reputable source I can find that agrees with you. Your use of one month of retail numbers, which have been analysed much and concluded by all (I can find) as inadmissable as justification for your assertion that Growth is just about to spring from it, is incredibly tenuous. Demand is falling, with almost complete agreement in economic circles that it will fall further and fall dramatically.
You then go on to say “there is nothing wrong with slow growth if inflation can be kept low”. I disagree. Or rather, whereas I believe slow growth is inevitable, there is most definitely something wrong with it. Plus – inflation is not now or likely to be low going forward for quite some time.
I make the case again and ask you to consider it: You are simply trying to argue that your Coalition is right – rather than use any defendable or secure evidence to prove they are. It is just bad economics.
cuse,
you say I have been jumping on bandwagons with one breath and with the next call me persistent.
I have been consistent in my views since the very first time I wrote on Libdemvoice regaridng the economy, high;loghting inflationary pressure as a danger when no politican, in our ouyt of government, nor any major media organisation were, I followed that through by talking about the risks of putting up inlfation.
Every piece I have written I have posted links and refernces, because frankly I wouldnt ewaste anyones time by just writing about soemhting without a thing to back it up. This blog contains links or refernces to articles and quotes by others, and also to my previous posts to help with context, to say I write without any evidence is frnakly insulting.
Whether my analysis continues to be proved correct or not, time will tell,
but I have been consistent, more ocnsistent than most politicians, certainly most Lib Dems, and more consistent than most media.
I am a lib dem activist and supporter of the coalition, so sometimes the criticism contained in my pieces f the lib dems are muted because it is criticims of the views of people I respct, but that does not mean that I am uncritical.
@ inflation may not be low for a while, I highlighted that months ago, but its supply sdie inflation and if dealt with corrcetly thats a whole lot more easy to fix than is demand side inflation.
I didnt say growth would spring from those numbers, I said they showed where demand is at, in conjunction with Ian King’s anasis, growth will come from falling inflation, thats the purpose of the piece.
Im not that bothered whether people agree with me, they didnt agree wuith me when I highlighted the dangers of inflation many months ago, they agree now.
They didnt agree with me when I said government policy wouldnt lead to a double dip, but it seems Ed Milliband does now.
So I will continue to plough my own fuorough, If Im wrong, then I will admit it.
@ Cuse
“Nor do I understand why, after some solid economic argument put forward by you, you feel the need to keep attacking Labour.”
Because they consistently lie about their role in our economic problems and try to rewrite the clear, demonstrable facts about what happened while they were in office. Why is this relevant? They were in office for 13 years till just seven months ago. Don’t you think that is slightly relevant, just a bit?
You say they don’t oppose cuts. Well when have they EVER given their backing to ANY of the cuts proposed? Ever?
Can you name just one?
They deserve to be attacked and hard for being so damned hypocritical and trying to weasel their way out of taking the blame for their appalling economic record.
@ Steve
The Angel of the North is an ugly lump of metal which will be melted down for scrap within a few years as being devoid of any meaning. The only meaning it could have is as a memorial to the long disappeared industrial heritage of the region. Putting up a memorial to something means it is dead.
Why not, for instance, target the money at giving the brightest Oxbridge graduate engineers bursaries to stay out of the City and financial sector and set up businesses locally?
Labour wasted huge amounts of money and meaningless public art, although representing a tiny percentage of the waste, was symbolic of a superficial approach to regeneration which did nothing to solve the underlying causes of regional decline – lack of private sector growth.
@David Thorpe
I re-read your pieces, in response to your claim: “People didn’t agree with me when I said inflation was a danger”. Your link to your previous blog had not single claim from anyone saying they disagreed with you.
You claim I said you jump on bandwagons. When did I say that? Who said you weren’t consistent? You’re consistent because you keep trying to use circumspect data to force support on a Coalition economic strategy to say “Look it’s working…Look it’s working…Look it’s working…”
On PM this evening, it was discussed that ‘most’ economists predict that inflation will only rise in coming years. What does this mean for your theory?
@Robert C
Come on Robert. It’s politics. They’re hardly going to admit to the partisan view that you or I have about their role in the deficit. The Coalition are lying now about their current policy – they’re no different. Clegg cannot admit that he signed a pledge about Tuition fees and that it was a mistake.
Again – you can’t fix the economy by blaming Labour.
I blame Labour, but I blame the Lib Dems even more for not putting anything in their 2005 manifesto to regulate the lenders, tax the borrowers or pay down the national debt – you were supposed to be the opposition, but you knew you’d lose votes by threatening to end the voter’s party. As far as I can see, you’re not in a position to blame anyone else.
I also blame the tories for the exact same reasons. So, if I am to base my vote in the next election on who was responsible for the economic crisis then there’s no actual difference between the three main parties. So what should I base my vote on? Can you not see how it might be beneficial for the economy and your future prospects to stop blaming labour all the time?
Steve: the 2005 manifesto contained a commitment that “government debt should be no higher than 40 per cent of GDP” and called for action to deal with “the explosion of personal debt”. That’s rather more than nothing.
Mark Pack,
The government debt was no higher than 40% (the sustainable investment rule) at the time the financial crisis struck. Your policy in 2005 was the same as Labour’s policy – It didn’t prevent a massive deficit from resulting when the revenues dried up.
What action did the manifesto call for to address the personal debt problem? What actions were to be taken? I genuinely don’t know, so would be grateful if you can let me know. Were the Lib Dems going to put a cap on loan ratios (to income or asset value), tax buy-to-let, introduce a land-value tax, increase capital gains tax, increase council tax on second homes, regulate unsecured lending? As far as I can tell, the manifesto promised greater levels of taxation and spending, but was there anything in it that said the Lib Dems would either make adjustments to taxation or spending to ensure that a surplus would result (whilst the economy was in growth)?
I managed to find something:
“We will tackle irresponsible credit expansion in mortgages and personal loans by curbing misleading advertising and anti-competitive practices by promoters of insurance for mortgages and loans, and of credit cards.”
I really don’t think that would have made any difference though. I’ve never heard anyone blame the expansion of credit on the misleading advertising and anti-competitive practises of promoters of mortgage insurance. My conclusion is, therefore: nothing discernably different to Labour in regard of the regulatory or fiscal policies that allowed our current problems to be created.
@Steve
NEVER! LDV only partially quoting the facts to support a tenuous Lib Dem policy?
I don’t believe it…
@ cuse
there are specific comments from posters sucha s richard hill, disagreeing with me directly, and others who disagree with me more obliquely
@ cuse
also I dont remebr any media organisation or commentator highlighting inflationary risks then, the bank of england had a target of 5 and when it went way over that target….responded by saying they didnt know why that was.
Also no politician from any party, including teh Lib Dems WAS PUBLICALLY SAYING INFLATION WOULD BE the threat.
I dont think the thread Ive linked to is even the earliest warning I gave on this site, and will try to find the earleri one.
@
steve
a theme of my post above is the subject of where growth will come from.
I also believe that things like the green investment banbk will delivbcver jobs.,.,. as will the cut in corporation tax.
@david thorpe
Richard Hill disagreed with you on QE – not inflation being a danger.
Others disagreed obliquely? Is that a euphemism?
Could you link to where I said you jumped on bandwagons or were inconsistent? I get the feeling you’re finding disagreement where none exists; agreement where none exists and evidence for your Coalition’s strategies being successful – where none exists.
@David Thorpe
That’s what happens when all you read are partisan political mouthpieces:
http://uk.reuters.com/article/2007/04/24/uk-britain-economy-inflation-idUKL241443820070424
http://www.guardian.co.uk/business/2010/jan/19/inflation-surges-in-december
cuse,
you mjust be more intelligent than that. you highlight a gaurdian article from 2010(january) in which vince cable talks abotu inflation, why would I as a lib dem want to ignore that?
well here is a hint,
thats was before the cuts were announced.
and once the cuts were announced by the coaltion the expecattuion was inflation would nto be a problem, I said it would be because of supply side factors and even in the cuts , and was in a small minority.
your efforts to disprove this show you highlighting an article from before cuts
Oh David, you’ve resorted to baseless insults.
I linked the Guardian piece in response to your statement “I dont remebr any media organisation or commentator highlighting inflationary risks then”. Inflationary risks have been present and commented on for years. And besides – stop trying to get off subject.
Yet more evidence below that tells you why your ‘lone economic furrough ploughing’ appears so indefensible.
http://www.guardian.co.uk/business/2011/feb/21/household-finances-markit-index
One month of figures hidden in other economic data does not a growth strategy make, my friend.
cuse
in that gaurdian piece vince cable describes inflation as likely to be short term, so it wasnt highlighting the longer term danger, also it was published in january 2010 i.e before the coalition, and before the cuts were announced and many commentators began saying that cuts would take demand out(which they do) and therefore be deflationary, thats when I began high;ghting the dangers of supply side inflation.
vince cable writing in the FT about ‘growth strategies agrees with me:
Critics of the UK government calling for new growth strategies miss the point. Growth is not something concocted by the state, like a health potion at the chemist. Our job is important but modest: to create an environment for business to expand, invest and innovate; reviving what John Maynard Keynes called “animal spirits”.
Some commentaries assume that achieving financial stability through fiscal discipline is a simple problem. It is not, but tackling it in an orderly way is far better than being dragged kicking and screaming by the bond markets, like some of our European neighbours. Even the critique by Richard Lambert, departing head of the Confederation of British Industry, starts with a strong statement of business support for our deficit reduction commitment (and criticism of our predecessors).
Beyond this, growth must be driven by private investment, not government or private consumption. It must also be led by traded activities, notably manufacturing. Again this is not easy, though data suggest the picture is improving, in significant part due to rebalancing through devaluation. The last government only paid lip-service to this model. An asset boom delivered seemingly endless consumption-based growth, but did not make Britain a great place for business. The strong exchange rate suited the City of London, but not manufacturers. When they turned to this issue, after the recession wrecked their model, it was too late.
We are determined to do better. Part of our growth strategy is to get out of the way of private sector recovery. Both parties in the coalition are committed to a liberal economic policy. The agenda I set out six years ago in the Orange Book, a Liberal Democrat pamphlet, still applies: deregulation; competition; free trade; and inward investment. We are putting flesh on these bones: reducing the regulatory burden caused by the industrial tribunal system; implementing “one in one out” rules; opening up public procurement; private sector disciplines for Royal Mail; and a more liberal single market.
This is not “laisser-faire”; our approach is pragmatic, not ideological. There are market failures to correct and public goods in which state investment is vital. Skills are one. Britain has a skills deficit including a shortage of engineers. We are investing in apprenticeships and an increase is taking place, with more to come. Higher education reforms will sharpen the incentives to promote marketable skills.
A second area for intervention is science and technology. Governments will not produce the next Google or Microsoft but can help promote the foundation technology. The science budget has been shielded from cuts, while we are now deciding how best to cultivate next-generation technologies through innovation centres that link theory to commercial application.
and vicky price a former treasury civil servant under brown says the government should keep doing what its doing, which is not very much at all