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The Stupid Economy.


bigmatt
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So if the economy of the whole world is screwed, what does that actually mean? Like, how can the entire world's economy just collapse? How can everyone owe money? Who lent it out in the first place?

 

I don't understand the concept of money that you can't see. Where are these millions of billions of trillions of whatever currency actually coming from? Is it all held in gold somewhere or something? How do they work out how much money a country has/owes?

 

I'm actually quite interested in all this, because it quite frankly sounds awfully dodgy.

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So if the economy of the whole world is screwed, what does that actually mean? Like, how can the entire world's economy just collapse? How can everyone owe money? Who lent it out in the first place?

 

I don't understand the concept of money that you can't see. Where are these millions of billions of trillions of whatever currency actually coming from? Is it all held in gold somewhere or something? How do they work out how much money a country has/owes?

 

I'm actually quite interested in all this, because it quite frankly sounds awfully dodgy.

 

The thing that bugs me most is the utter stupidity of how these so called debts are structured. From that chart Magic posted, for instance, the UK owes the US 578.6 billion Euros...and the US owes the UK 834.5 billion Euros... and both the UK and the US are paying interest on those numbers, when in fact the actual ****ing truth is that the US owes the UK 834.5billion - 578.6billion = 255.9 billion. But apparently simple math is beyond people in the financial sector.... oh, what a surprise...

 

The other problem is that money is a token, it's a means to enact your buying power and it has no value of its own.... until you let economists at it. Oh, and don't get me started on how the rich corporate fat cats only vote themselves richer while doing everything in their power to make the poor poorer....trickle down economics is a lie that has never worked, and never will.

Edited by etz
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really shows you that we owe 1 trillion to eurpoe and 500Bn to the US but the US owes us more so that kind of cancels that side out but it shows exactly how vulnerable we are to the eurozone crisis. Shows really what a finincial gateway we are between the Us and europe in that we're owed more than twice what Germany is and as much as the Japanese are owned.
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Sounds a bit far-fetched or farcical, but a lot of this debt is money that never actually existed.

 

Imagine you are a bank, and you have £1000, and you lend 10 people £100 each, with the understanding that they'll pay you back £110 each. That's simple; that's how banks work. You've got £100 profit coming in, interest.

 

But imagine no one ever pays you back, because all of those people lose their jobs.

 

Coupled with that, you've already spent that £100 you've earned on a sofa, on a "buy now, pay in 12 months" scheme.

 

You're now in debt for £100, and that £100 has never actually existed.

 

That's kinda how everyone can owe everyone money, when people speculate with money that hasn't hit their accounts yet. Sort of.

 

Cheers!

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After the comprehensive spending review just over a year ago (Doesn't time fly when you're having recession) I posted a Paul Krugman article on how he thought the austerity plan by the coalition government was wrong. Paul Krugman is a Nobel Prize winning economist that has been one of those public figures arguing for more emphasis on growth e.t.c for years. Here is his latest take on the Autumn statement thing a couple of days ago.

 

These days, ambulance-chaser economists like yours truly have an embarrassment of riches: so much is going wrong, in so many places, that one hardly knows where to start.

 

But let’s spare a moment for a disaster that’s being overshadowed by the euro crisis: Britain’s experiment in austerity.

 

When the Cameron government came in, it was fully invested in the doctrine of expansionary austerity. Officials told everyone to read the Alesina/Ardagna paper (which is succinctly criticized by Christy Romer (pdf)), cited Ireland as a success story, and in general assured everyone that they could call the confidence fairy from the vasty deep.

 

Now it turns out that contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? More austerity!

 

Underlying the drive for even more austerity is the belief that the underlying economic potential of the British economy has fallen sharply, and will grow only slowly from now on. But why? There’s a discussion in the Office for Budget Responsibility report, p. 54, that basically throws up its hands — hey, these things happen after financial crises, it says, and cites an IMF report (pdf).

 

So I wonder: did they read the abstract of that report? Because here’s what it says:

 

Short-run fiscal and monetary stimulus is associated with smaller medium-run deviations of output and growth from the precrisis trend.

That is, history says that a financial crisis reduces long-run growth potential if policymakers don’t limit the short-run damage it does.

 

And yet what’s happening in Britain now is that depressed estimates of long-run potential are being used to justify more austerity, which will depress the economy even further in the short run, leading to further depression of long-run potential, leading to …

 

It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.

 

And the truly awful thing is that Cameron and Osborne are so deeply identified with the austerity doctrine that they can’t change course without effectively destroying themselves politically.

 

As the Brits would say, brilliant. Just brilliant.

 

http://krugman.blogs.nytimes.com/

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I think it's the last line that tells the tale, they have to do it because politically they would be destroyed.

 

But we working people want solutions, not politics, so why the hell can't they just do what is right for the country rather than worry what the world of politics think? I mean, the BBC go on about embarrasments and all that crap, who cares? Really, who the hell cares apart from petty minded ********s who want to big their own fragile egos up?

 

Do what's right for the country, not what politics says you can do, f*ck politics in the bum, they mean nothing to me, you know, the British citizen and taxpayer! [/fallondeafears]

 

*Sigh*

Edited by Saz
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The trouble is in this country (and I'm sure it's much the same in every country) is that this recession - simply because we are affected in this country by it - MUST be the ruling party's fault. To be frank, that's not the case. In fact, I cannot think of anything that anyone could have done in the past to avoid Britain becoming affected by this recession, and I cannot think of anything that anyone can do right now to get us out of it.

 

It's a recession, after all. About 80& of the world is affected by it.

 

The Tories can do their cuts; Labour can do their borrowing & spending; The LibDems can do their tax-increases and pension-pinching... hell, we could vote in the Magical Money Fairies as ruling Govt. and even their plan of sprinking Magic Money Fairy Dust on everything will. Not. Get. Us. Out of this recession.

 

What do we do then? How important is it that Britain reduces it's deficit? How important are higher taxes? How important are job cuts? Yeesh, I don't have any answers other than my simple bit of advice:

 

If you are lucky enough to be earning money right now, then save that money. Just keep saving money wherever you can. Money gets people out of recession. Loads of holes in that theory, and that's why I'm not Chancellor of the Exchequeor :lol, but save your money people, because no-one, even a Nobel prize-winning economist, has any answers.

 

Cheers!

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