Actually, it is considered more or less a zero sum game. Resources are finite.

Government to find funds to send every secondary school pupilto the WWI battlefields in 2014. Not sure how that constitutes investment with a positive UK multiplier effect.

Sorry, when you gave your example then said "that's how cuts could work" I thought you meant. 'This example shows how cuts could work', apparently I misunderstood.

Also an example doesn't explain anything if it is based on assumptions that are completely untrue.

It hasn't been until now, I'm not sure why this is suddenly going to change.

I think he said a pupil from every school, not every school pupil, which tbh probably isn't much of a change, every high school I know runs a yearly school trip to the battlefields anyway.

You don't think that sowing an interest in history, or just plain old research into anything will benefit a person, a society and business ?

I suppose we could invest billions into providing CNC Lathes for every schoolchild instead and get 11 year olds to produce nuts and bolts for the world, but thats kind of single focused education isn't it ?

and when everyone's house is insulated they're back on the dole. wait, then we train them all up to be able to build new homes, so they build the homes and then insulate them. meanwhile the people who originally insulated and built homes who are now out of work due to massive influx of these ace builders and insulators train to do something else, oh i don't know, farming, yes, they all become farmers. ffs.


yes it can. it can happen as quickly or as slowly as people want it to.


so i'm expected to keep doling out my money to people so they don't rob me? really? maybe we should just hand out tenners until crime just stops completely.

Hi Samwire - I look forward to reading your positive contributions to the discussion. Y'know - actual ideas. Backed by actual logic. And sense.

Like, for instance, how you create, design and develop a new product, then find the market for it overnight.

Over to you, dearie. You're the expert, obviously.

the same logic that comes up with just giving everyone a job?

You need a hobby

How long do you think that is going to take, a year, five years, or your whole lifetime ?

Are you aware that the current round of subsidies for home insulation is looking at upvc double glazing that was fitted more then ten years ago simply because improvements in design and material technology means that the upvc windows you fit now are so much more efficient at insulating your house that its worth replacing the old ones ?

Have you looked at a new build house these days and wondered why their double glazing is only a few millimetres thick while the ones that you had fitted in the 1990s are 15 to 20mm thick ?

Do you think the research into house warming efficiency will EVER stop ?

oh, so we're not just training them to bung some insulation in. they're going to be designing and fitting windows as well. will the polymer science training be just as quick as the installing insulation training? and there's the new glass technology that these poor buggers will be developing too.

As Sky's economics correspondent Ed Conway was tweeting about yesterday, the latest round of debt issued by the UK government was for £12bn of borrowing on 12 year index-linked (ie inflation proof) bonds, which sold at a negative interest rate, -0.441%. This means lenders are paying the UK government for the privilege of lending to it, presumably because they fear that a guaranteed loss of 0.441% a year over 12 years, is better than the alternatives of investing elsewhere and risking losing more. So we are now getting paid to borrow money. https://twitter.com/EdConwaySky

As Sky's economics correspondent Ed Conway was tweeting about yesterday, the latest round of debt issued by the UK government was for £12bn of borrowing on 12 year index-linked (ie inflation proof) bonds, which sold at a negative interest rate, -0.441%. This means lenders are paying the UK government for the privilege of lending to it, presumably because they fear that a guaranteed loss of 0.441% a year over 12 years, is better than the alternatives of investing elsewhere and risking losing more. So we are now getting paid to borrow money. https://twitter.com/EdConwaySky

And don't decry farming: why not? Why not improve our own food production and security, eh?

But y'see, your little knee is playing those jerkery games so you're not reading all of what I have posted. Either that or you have comprehension difficulties.

I have said, the economy needs rebalancing. At present, 75% depends on people purchasing services or goods.

We need to start creating things and selling them – preferably including actually exporting them.

This does not happen overnight – and indeed, I'm still waiting for details of the product that can be designed, created and a market found for it overnight.

So in the meantime, while that process is happening, we need to create jobs – or the recession will continue, there will be no growth and the deficit will increase. Do you not understand that?

Probably as quick as developing a new product, designing it, getting a manufacturing set up created, finding markets for it etc etc etc. Y'know – 'as quickly as you want' – isn't that what you have claimed?

I think if you changed tack from the rather weird conviction your neurons seem to have gathered that the actual firm and sole proposition on this thread as a solution to the country's economic woes is the re-training of every unwaged person immediately as a full-time insulation fitter for the rest of their working lives, then it might just click that the poster only advanced insulation as one single illustrative example, and not as the panacea to solve the world's financial woes.

And to clarify, it was a comment originally made by Lord Robert Skidelsky at a conference on economics in June, as (exactly as you say) one illustration of something that could be done quickly.

The problem is that people seem to think there is only one answer, and that answer will work instantly. There isn't, and it won't - you have to do lots of separate things in order to fix things and it needs to be given time.

If your personal income was £20k per annum but your outgoings were £22k per annum you'd have to make cutbacks. That's bad enough, but if, however you also had a personal debt of £20k that you needed to pay off, you will need to make MORE cutbacks in order to repay that debt. Once you have that under control, you should then have a little money to spend on luxuries. All in theory of course, but you get what I'm saying.

Similarly, austerity measures won't produce growth, but I'm not convinced anyone is trying to say it will. What it SHOULD achieve (Whether it is or not, is for another debate) is to slow down, then eventually halt the decline and reduce the deficit. Growth can be tackled afterwards once there is the money in the public purse to do so.

How – given that it is currently increasing the deficit?

As touched on earlier, the household budget analogy is tempting but fatally flawed.

In the instance of a government, the income also goes down when they enact austerity measures – with a concomitant rise in outgoings because of that. The household analogy assumes a stable income.

But the government is not me or you. Governments can do things we can't. Such as print money and control interest rates on the debt. They can even just right it off or rather refinance the debt in such a way as that is what it means in practice (this was one of the suggestions made in one of the links below) .



It will only reduce the deficit if the governments income exceeds its outgoings and that isn't happening. Tax revenues aren't holding up enough and a big reason for this is demand it weak as people (as opposed to governments) do behave as you suggest and pay down personal debts rather than spending money. Or are now unemployed so are not spending anyway.

It has now got to the stage that the idea of using "helicopter money" is being discussed. This is where the Bank of England prints money and gives us all a wadge of it which we then spend stimulating demand. As opposed to printing money to give to banks in the hope they will lend it on which is what they have been doing but which hasn't really worked. See here [urlhttp://www.bbc.co.uk/news/business-19917480[/url and here [urlhttp://www.bbc.co.uk/news/business-19918332[/url

It is because governments can do these things that your example above based on personal debt is just too simplistic a way to look at it. Unfortunately it does seem to be how Osborne looks at it and the longer he does the more apparent it becomes that without any measures to stimulate growth he is just digging the hole deeper.

No you wouldn't, you could get a second job, or take out a loan.


No you wouldn't, you could either do a deal with the lender and reschedule the repayments, or go down insolvency way.


I have yet to hear any convincing argument as to why more money should end up in the public purse. So far as I know, the purse has for many decades been not only empty, but "minus" in the multi-billions, and so far as I can see, the only thing austerity measures are guaranteed to achieve is a net increased outflow of funds for all the additional benefit claims made on the public purse.

Give me one example of an austerity measure you seriously believe could effect savings to make up for paying a quarter of your population to be out of work.

I do think people get too caught up in differentiating between selling/making "product" and "service" particularly if feeling services are "real" or sustainable.
To use an example from my business, I might be talking to a client who needs some more IT processing power.
I could sell them a server that they put in their data centre to meet that, and I've sold a product.
Or I could sell them some processor time on a machine (which may be a standalone or could be shared infrastructure) and I've sold a service.
Is there really a massive differentiation between them?

As has been pointed out personal or household income is not comparable with a country's income for many reasons. The main one being that households aren't generally buying products and services produced by other members of the household, so reducing expenditure won't have a big impact on the household's income.

However when the government make cuts they are laying off British workers who instead of paying taxes claim jobseekers, who now have no money to spend in the local economy so local businesses suffer. At a time when lack of demand is a huge problem, governments cuts only make it worse.


But austerity in the current climate effects growth to such a degree that debt as a percentage of GDP isn't even decreased, so I won't even mention all the pain caused to British people and companies I'll consider simply debt/GDP to show how it is self defeating:

Facts: debt is currently approx 70% of GDP, The IMF say that the fiscal multiplier in developed economies is currently between 0.9 and 1.7.

Scenario A: GDP grows by 2%*, there is a deficit of 7% so debt/GDP=77/102=75.5%

Scenario B: The same as scenario A except we're going to cut spending by a further 1% of GDP. The multiplier is 1.3 ** so this reduces GDP by 1.3% relative to A so GDP is 100.7. For every £1 you reduce GDP, you reduce government revenue by approx .4, so the deficit isn't 7-1=6% its actually 6+0.4*1.3 = 6.5%. So Debt/GDP is 76.5/100.7 = 76.0%.

So for every extra £1 cut, debt/GDP actually increases by 50p.

You might be wondering why the government are cutting if the above is true: it was only a couple of days ago the IMF released their observations on the fiscal multiplier in current conditions, the OBR were basing its predictions on the multiplier being approx 0.4 (which if were true would mean for every £1 cut debt/GDP is reduced by approx 50p)

Now they know the true values will they change their plans? I doubt it, it would be political suicide, and I think they quite like the idea of a smaller state, even if they are ruining the economy.

[size=85
* this value is just so i'm working with numbers not algebra, i couldve chosen anything and it still shows approx a 50p rise in debt over GDP for every £1 cut
** I chose the value at the middle of the range provided by the IMF, even using the lower bound the extra cuts are self defeating[/size

Mental picture of Robinson as Mr Micawber...

Surely the server manufacturer sold a server i.e. a product in both cases either to your customer or to the data centre of the service provider? Unless you manufacture servers you are acting as a 3rd party middle man in both scenarios and in both cases are therefore part of the service industry.

That said I am not sure what your point is?

We are both manufacturer and data centre provider. One method counts as a product sale, and one as a service sale.
In fact the client could also lease the server from us in which case we've sold a service, or buy and lease via a financing company (which may be part of my company of may be external) in which case we've sold a product, to a financing company.

The point is that there seems to be a view that a service based economy isn't as real as a product based manufacturing economy, when in reality service and product aren't necessarily that different.