George Osborne and Mervyn King announce panic measures to try and save the UK economy. Great deal for the banks, give the BofE more worthless financial toxic crap as collateral to get a handouts in a desperate attempt to stop the housing market from crashing, which in turn would bankrupt said banks. Surely people must now be realising there is no way out of this global debt spiral. The only answer anybody seems to have is to add even more debt to the mountain of debt we already have! IMO it all boils down to this, AT LEAST 97% of what we call money is infact a bank created IOU. All savings accounts are merely promises to pay as are all pensions, government bonds etc. What we are seeing is a battle betwen who's IOU's are honoured and who's IOU's are ripped up. At the moment the bankers of the western world are using governments to ensure their IOU's are the ones honoured at the expense of the general public, who are seeing their savings disappear, their pensions cut and jobs destroyed. www.mirror.co.uk/news/uk-news/ge ... ion-884350

George Osborne and Mervyn King announce panic measures to try and save the UK economy. Great deal for the banks, give the BofE more worthless financial toxic crap as collateral to get a handouts in a desperate attempt to stop the housing market from crashing, which in turn would bankrupt said banks. Surely people must now be realising there is no way out of this global debt spiral. The only answer anybody seems to have is to add even more debt to the mountain of debt we already have! IMO it all boils down to this, AT LEAST 97% of what we call money is infact a bank created IOU. All savings accounts are merely promises to pay as are all pensions, government bonds etc. What we are seeing is a battle betwen who's IOU's are honoured and who's IOU's are ripped up. At the moment the bankers of the western world are using governments to ensure their IOU's are the ones honoured at the expense of the general public, who are seeing their savings disappear, their pensions cut and jobs destroyed. www.mirror.co.uk/news/uk-news/ge ... ion-884350

The weather's not bad, though.

The problem is when they came to power Osborne and Danny Alexander plus all the rest of them never stopped banging on about how we would be the new Greece if we didn't adopt their plan (Plan A as it has become known).

This put the fear of God into individuals and small businesses and no one wanted to invest in buying a new house or expanding their business.

Now he wants to give the banks £80bn to lend to people who STILL don't want to borrow.

If he can magic up £80bn then spend it directly on stimulating the economy. Do not give it to banks on the cheap in the vain hope there is actually a queue of people and businesses waiting for the money. Their isn't.

In short their polices and their rhetoric killed off what little demand there was in the economy and you aren't going to stimulate that demand by making money available to borrow when no one has a reason to borrow it.

Of course investing such vast sums directly into the economy would be the biggest U-turn of the lot and would be an admission that a Plan-B was needed.

I see from the press this injection of cash is being talked of as "Stretching Plan-A to the limit". It's as if the idiot Osborne would rather keep digging us into an even bigger mess rather than admit he was wrong.

so, let me get this right, we had a recession based largely on profligate lending and borrowing, and so we're going to lend/borrow our way out of it?

have I missed something, like them putting LSD in the water in Whitehall?

No – and, err, yes. Possibly.



Honestly, if someone can suggest a way of posting a PowerPoint presentation, I'll do so.

Labour's spending was not at record levels – much as they (for obvious reasons) allowed that myth to grow.

Whatever happens in the long term, in the short term, we need growth. We have an economy that is massively (not entirely, but massively – approx 75%) reliant on the service sector. So we need people to spend.

But as recession continues, as if the employment levels don't improve, that will not happen.

The best resource we have – as is the case with any nation – is ultimately its people. QE has done FA, mostly because the banks are simply not lending to small and medium-sized businesses.

It's an historically proven fact that you can spend your way out of recession and into growth. And indeed, look at the US (and I am no massive Obamaphile).

IMHO, we should look at a serious state house building plan. Employ people, who then have money to spend (and are paying tax but are not on benefits – if paid decently – which supports local business etc). But also because it tackles one of the real root problems of the crash and crisis.

There is also the point that hype about the 'national debt' is usually over simplistic – the 'national debt' was at over 100% levels for most of the first half of the 19th century – hardly a time of wild spending on public services. And nobody would cite it as such. But then, nobody would cite the national debt at that time as a massive problem.

And so on and so forth ...

The Greek election is looming and the credit markets will probably seize up. This is their attempt to help the UK system deal with that.

The only way to solve the debt crisis is to spread the losses over a period of a few years and in doing so make the bondholders, rather than the public directly, take the losses. Banks need to be made to go bust (lots have in the USA in the last 4 years, the UK has / is introduced/ing living wills to allow bank to be wound up, but the idiotic politicians in Europe are burying their heads and actually increasing the problem). The public (ie sovereign states) can't afford the losses.

so, if we can spend our way out, give the cash direct to anyone who pays tax, some will bank it and some will spend it.

I am a conservative, but this bunch do look more and more clueless by the week.

No because we didn't and not really because while the govt is going to borrow more it isn't necessarily going to get us out of it. It is relying on everyone playing ball but no one seems up for the game the chancellor wants them to play.

I agree and have said for 4 years that a big council house building programme is the only sensible way out of this. This would not need to be government funded, it could be privately funded in return for a rental income stream underwritten by the government. Trouble is neither Labour nor the Tories want council houses. It's up to people to start vociferously demanding them.

wont happen, once benefits start getting paid direct to claimants the ability of social landlords to borrow will collapse, we've just completed a £150m bond issue, it will be the last one we manage to get through unless the legislation is reversed.

add in the Green Deal and Tenants Cash Back and Welfare Reforrm and social housing is only going one way, backwards even quicker than it ever has before.

In an uncertain economic period like we have now, if you give individuals money (presumably through tax cuts) all they will do is save it, not spend it. By investing in a massive, short-term infrastructure project such as increasing the social housing stock, you get people off benefits and into work. These people then inject their newly disposable income into the retail and service sectors by buying goods and services. The Treasury gets back some of its investment through an increased tax take and reduced numbers on benefits.

and who would increase social housing stock, which builders, which contractors, the same one's that raped the exchequor for Decent Homes and we saw no economic benefit?

People would not spend or save but pay down debt (at least the majority, who have debt). That's the logical thing to do. It's what has been happening. On one level it's also a good thing, on another it means the economy is quite slow. In fact what we really need is to export. Consumer spending within a purely domestic context is fine, but the reality is consumers buy stuff from abroad creating a balance of payments deficit. We need to pay down debt and export alot more. If we ride out the huge storm ahead (and that won't be easy, given the Eurozone bank losses will stop somewhere - my guess is in the UK - given the increased frequency and panic within Osborne's speeches aimed at telling the EZ politicians) and get an export led economy steaming forward (we can dream!). Then we should engineer a huge reduction in real house prices over a period of years.

There is no demand abroad so we can't grow through exports.

We have a Treasury that is doing nothing and a central bank that is trying to support the economy but we're in a position where monetary policy is not being effective on stimulating demand (ie a liquidity trap).

We will be stuck in recession/low growth for years waiting for the market to 'self correct' and we will lose masses of lost output in that time.

The economy needs to be kickstarted by an increase in government spending ideally on some infrastructure to address problem areas etc the housing stock. As regards concerns over borrowing its a different situation to Greece, UK government borrowing costs are at record lows anyway so price signals are telling us that its a sensible time to borrow to get the economy moving again. You can tighten fiscal policy as the economy grows again, its much easier to rebalance a budget when you are back in a 3% growth spell.

I know I've mentioned this before but:

Between central and local government, there are thousands of hectares of land available, suitable for housebuilding. Invite charities and not-for-profit organisations to lease this land on 99 year, peppercorn rent agreements. The average cost of building a house (materials & labour) is about 40% of the total value (including land), so pension funds and insurance groups would be falling over themselves to lend the money to build because the returns would be far greater than government bonds could offer. These houses could then be rented at 50% of the prevailing rentals.

Some caveats would need to be built into the system such as: the houses could NEVER be available on a "right-to-buy" basis and the remuneration of executives of the housing management companies (non-profit remember) should be subject to a cap - say £100,000.

Such a scheme would:

Return unused land back into useful land and promote community

Create jobs through a building programme

Stimulate demand for goods to furnish the homes

Reduce the amount of housing benefits paid (the vast majority of the current recipients are already working)

Increase revenue to the exchequer through PAYE & NI and VAT

It wouldn't cost the government a single penny, the land is already there, they own it, they simply decide to do absolutely nothing with it.

Problem is, as I have said earlier, the social housing sector cannot finance the investment, direct payment of benefits means that pension funds etc are totally disinteretsted in future investment. and why should senior management of social housing be capped, I know of some very good people earning £200k a year that could get more in the private sector.

for once, listen to someone who knows about the issues.

Did you completely miss the bit about finance coming from Insurance groups and pension funds? Both are big buyers of gilts because they see a steady, if unspectacular return, such a scheme would offer better returns than government bonds. If UK institutions weren't interested, there are plenty of European ones who already make substantial investments in similar schemes and would be willing to invest here.

The reason for capping senior executive pay is simple: although an organisation may be prima-facie "not-for-profit", that doesn't prevent the executives from divvying up what would be deemed profits among themselves. Hence the need for a cap. Any surplus revenues should be earmarked for re-investment back into the projects or to cover contingencies such as maintenance & repairs etc.

The only drawbacks I could foresee to such a scheme would be: private landlords would see their revenues from rents reduce as a knock-on effect. The banks who hold the motgages on buy-to-let properties may also see their liabilities increase because the mortgage may be higher than the value of the property. Tough, they were happy to trouser the profits in good times, it's high time they stopped trying to socialise debts in difficult times. But the main drawback remains that this government would be required to conduct a complete sea-change in ideological approach to housing.

you clearly have anecdotal knowledge of the sector, so I'll leave you too your Indy informed rants, I KNOW the sector and I KNOW how it works.

if there was a sensible time for government borrowing it is now when govt debt is as cheap as it as ever been. That ability to borrow at record lows should be used to finance capital projects not just poured into banks bottom line, There are two fundamental flaws with this current plan to inject capital that must be relent. Firstly the condems have scared any confidence out of the economy which has suppressed demand. Secondly the banks wont pass the low interest rates on. Thye will profiteer by charging ridiculously high rates and charges on any money they do re-lend again suppressing demand. I think its a safe bet that in twelve months the banks will come out pleading that they wanted to lend but nobody wanted their money just like they did with project merlin. If gideon had any sense he would have taken advantage of the state owned banks to get this money into the economy at sensible rates the competitive pressure of a state bank lending at reasonable rates would also push the others into lending at sensible rates.

So come on then, what would you actually propose?

You know, make some suggestions instead of pontificating that because you "Know" the sector (same as you "know" how the Olympics works etc), anyone else who proposes a break from the traditional way of doing things is an Indy-reading idiot. Why should the provison of housing be yet another commodity to be traded and profited from?

BTW you really should try reading the Independent, they have contributors and columnists who would appeal to your venal tory ideals too.

There was a young man on one of the news channels yesterday. He ran his own computery business and had approached a couple of banks for finance to expand. They were willing to lend but at rates of over 20%. Considering they are borrowing at next to bugger-all, that is close to usury

No it is usury.
I suppose the simple answer is the old Irish answer, it would be easier not to be starting from here, it would be easier if Osbourne hadn't done what he did two years ago and kill the little growth there was stone dead. It was a bright wheeze, get all the pain out of the way, a boomlet and a successful general election (for the Tories anyway) Balls said it wouldn't work and it hasn't.
What is needed initially is a temporary cut in VAT - which despite all the naysayers, is what stimulated the economy in 2009. The increase to 20% was the exact opposite of what was required. And as has been already said on here - get some investment in housing, in much needed public works, restore the schools rebuilding programme. If you get constructon right the rest will follow. When the Tories came in crying woe, woe and thrice times woe they overegged the pudding and scared everyone. Time to back down. Solution no 1? Sack Osbourne, it may not be entirely his fault but for credibilty of the the government he has to go.

You may know how the sector 'works' now but its not working that well. It's not how it worked in the past or, hopefully, in the future. Cod'eads suggestion has been put forward by serious individuals.

Banks are paying more than peanuts on the markets for money to lend, that's the main reason for this Bank / government initiative - to give them cheaper money to lend on more cheaply.

The young chap may have no track record and be considered high risk by the bank.

So many of the hard-pressed small businesses that bemoan banks not lending to them are not actually borrowing to expand but are basically not viable.

Osborne won't go and neither will many, if any others. This lot know they are a one-term government, they knew it before Cameron accepted the Queen's invitation to form a government. They are making the most of getting as much out of the state and into the hands of their chums as they can. The old tory grandees know this and are fuming at what is going on because many of them know that it could well be their seats that are lost.