Jantra

Jul 11, 08 - 12:42 PM

some positive news at last

HBoS, the owner of Halifax, is showing signs that it is willing to lend again. It has reveiwed its mortgage portfolio and decreased the fees associated with obrrowing as well as the actual interest rates on the majority of its products.

This does not mean that its attitude towrds risk has changed, just that its in a solid position cash wise and will continue to take on new business if it matches the business risk profile.

hopefully other banks will follow suit - we can then perhaps stop this nonsense about recession and start thinkngi in terms of slowdown. we need good news to stop it becoming a self fulfilling prophecy...ie talk of a recession ensures people panic and hoard cash thus creating a recession.

Zach

Jul 11th, 2008 - 3:37 PM

Re: some positive news at last

Two of the US's biggest mortgage lenders about to go insolvent. Oil at a new all time high. Equity markets around the world continue their slide. 3 month LIBOR still way off the official UK base rate.

but wait, I hear the news wires ticking.....

BREAKING NEWS....
Jantra says: "we have turned the corner"
BREAKING NEWS
ends/

I just love your optimism.

Jantra

Jul 11th, 2008 - 3:45 PM

Re: some positive news at last

it has to start somewhere

in fairness this is +ve news, its just well, swlallowed up in lots of negative news...I'm trying to star thte talk away from recession and you've just blown it...so its your fault if it does happen

Jeremy

Jul 11th, 2008 - 7:16 PM

Re: some positive news at last

Zach it is all your fault that the UK economy is up to its armpits in the brown gooey stuff. And I nearly believed the Daily Mail that Gordon Brown and the plonkers in the City were responsible. How wrong can you be!

Cambo David

Jul 11th, 2008 - 7:45 PM

Re: some positive news at last

It is noone's fault: markets simply have an element of irrationality to them and tend to overshoot and then undershoot equilibria.

The Daily Mail have a cheek given they have been trumpetting buy-to-let in their property and money pages for years.

Jeremy

Jul 11th, 2008 - 10:14 PM

Re: some positive news at last

With Fannie & Freddie both about to go bust in the USA it is the most spectacular undershoot. Who will bale out the US by some $5 trillion !!! Makes Northern Rock a storm in a thimble.

URBANO

Jul 11th, 2008 - 11:50 PM

Re: some positive news at last

The idea that the current economic problems ( or solutions) are created (or cured) by talking (or talking down) economic prospects is to ignore reality.

The idea is one which Cambo,in particular,as a "highly professional economist" now seems to have become converted ( his earlier predictions having proved laughably inept), despite ( curiously) the total lack of his( hitherto)never ending statics and " evidenced based" data to support this.

The simple fact is that money has become disconnected with productive output. That's the problem. There is unavoidably going to be a very significant adjustment. We are going to see standards of living fall from the (unrealistic) levels of recent times to (realistic) levels.

Whilst the Americans (and us) have been spending money we have not earnt( who,but a madman ,ever thought he could get rich by sitting in an armchair whilst the value of his property went up ...and up ....and up ) the Chinese ( in particular) have been working their nuts off producing things people actually want to buy

Any idea that they are the duffers and the West are the smart guys .....re - packaging liabilities ( decidedly NOT money )and moving it about to a lot of frankly pretty stupid people is just about to be brutally exposed.

Too many people in the West(a) dont't work ( b) don't work hard enough( c)think ( at whatever level.. from the taxi driver buy -to- let and-retire early type to the Bears Stearns Excutive type)that there's a get rich quick solution to life .....,or someone else will pay,much the same thing) element to human endeavour.

That attitude accounts for a lot of the ills in our society ( from packaging for sale hopeless debts to welfare orientatation ) and the inevitable imminent and unavoidable corection in the economy will focus minds for the good.

You are getting more than a whiff of political change now...........

Zach

Jul 12th, 2008 - 12:12 PM

Re: some positive news at last

URBANO.

Excellent post. I do chuckle at the way economists always have an explanation in retrospect. Ah, we now know why it's like the way it's like.

I'm not an economist. I'm just an electronics engineer, but to my (rational) mind the world's money supply has indeed become disconnected from reality.

A few years of recession I think will get us back to reality.

I'm on a good salary but it has intrigued me how people with ordinary jobs can have a lifestyles far in excess of mine. The reason; they weren't spending their own money.

PS Just back from new pool in the bay, and the police and 'debt collectors' were roaming with number plate recognition vans (like on the TV programmes)
They had clamped a big shinny black 4X4 parked on the pavement with two police cars next to it. Parking fines? Outstanding Loans? Cheered me up for the day.

jantra

Jul 12th, 2008 - 2:13 PM

Re: some positive news at last

URBANO

I was merely trying to say that the more pessimism there is in the news, the more people will expect a pessimistic end result. what we need is some spin of new labour proportions...perhaps we could get Tony Blair out of retirement to act as the UK's foremost economic authority.

recession = correction to market
downturn in productivity = focus on quality rather than quality
redundancies = return to core operations only

perhaps I should have the job myself

jantra

Jul 12th, 2008 - 6:08 PM

Re: some positive news at last

that should have said focus on quality not quantity

Jeremy

Jul 12th, 2008 - 8:54 PM

Re: some positive news at last

The problem with the world economy is the US Dollar. Since 1971 it has been the only currency in which crude oil could be traded and was therefore the de-facto world reserve currency. Every country in the world had to acquire dollars to purchase oil mainly from the middle-east. The middle-east invested those dollars mainly back in the US. One hell of a free ride, create dollars at little cost to yourself, inflate the value of US property and import loads of goodies from China.

Trouble is the chickens are coming home to roost. The world is losing faith in the dollar as certain oil countries are tempted to sell oil in Euros or Yen. The Iranians may be trying to develop nuclear weapons but they have also opened an oil bourse 17/02/08 (with internet problems around the middle east) to sell oil in Euros and other currencies (believe only dealing in futures at the moment). Which is the bigger threat to the USA?

The worlds central bank vaults are stuffed with dollars. The problem for many countries now is, how to get rid of their vaults full of dollars, before it crashes? And the US has bullied so many countries for so many decades around the world, that many will see a chance to kick the bully back. The US cannot accept even 5% of the world's dollars -- it would crash the US economy dragging much of the world with it, especially Britain.

Might help explain why Blair was pursuaded to join in a little invasion as Saddam was the last one to try selling oil in Euros.

Anyway that is my take on the situation. The economists will now put me right.

jantra

Jul 13th, 2008 - 5:09 PM

Re: some positive news at last

Jeremy

the central banks have for a long time moved from dollars to euross...it certainly is the eurozone's preferred currency of choice

seriously, most central banks would argue that the Euro has replaced the dollar as de facto international currency already.

and I reckon your take is quite accurate, from a certain point of view

Andrew

Jul 14th, 2008 - 12:38 AM

Re: some positive news at last

So why have we STILL not joined the bleedin euro yet then!?!?

Cambo_Dai

Jul 14th, 2008 - 12:07 PM

Re: some positive news at last

Urbano: your ilusions of grandeur as some kind of political and economic messiah prophesising a new world order show you up yet again. This is the difference between you and I: I make predictions that things will change a little here and there but will pretty much go on before. Most of the time this is right because most of the time dire things don't happen. I bet you were the same in 1997/8 with the Asian Crisis, in 2001 with the dot-com boom, and again in 2005 with the first sign house prices may crash. Like I said, if you cry wolf, eventually there'll be a wolf. That doesn't make the cautious economist a bad practitioner.

I detect more than a faint whiff off a very old fashioned idea in your arguments: that only manufacturing is real economic output and that services, and particularly financial services don't create real value. There are two reasons this is untrue: number one is risk: financial services offer very large opportunities for the spreading and hedging of risk, and this allows investments to be made that otherwise would not. People dislike risk, and even the dilution of risk has a value. Periodically there are shocks to financial markets and this creates a new source of risk, but individuals and firms consistent moves back to the market show that people believe it has a value. The second reason is imperfect markets: the growth and proliferation of financial markets has improved the flow of information, and allows an easy method for capital to flow between assets and production to ensure prices can properly adjust. Again you get speculation but modern financial markets allow this to be unwound more painlessly than the incomplete markets of the 19th and early 20th centuries (when banking crises were common in the US, and more frequent in the UK).

With regards to the role of expectations in economics: economists place expecations at the heart of modern theory. Expectations of inflation beggets inflation as prices and wages rise in anticipation; expectations of a recession can begget a recession as, in particular, firms cut back on inventories and scale back investment. And I believe expectations are based upon very much what one reads and hears in the media rather than what one sees for oneself. As evidence, look at what you get in political and policy polling. You ask people about their experiences of the NHS, or Schools, or other public services and they are generally pretty good. You ask them about "the service" and they are dire. People read a few bad stories in the press and it affects their opinion even though they see something different. And in the same way as speculation has an element of self-fulfilment, so does waves of panic and optimism in the press and media.

Pointing out the importance of expectations and the role of the media in forming them doesn't mean I have abandoned rational analysis of facts. Its just another fact to add to the mix. If people strongly believe there is going to be a recession and really start to retrench their spending, there will be one. Its still right to point out that most forecasts think the chance of a recession this or next year is a fair bit lower than 50% and that the latest figures (Q1 2008) show the economy growing at an annualised rate of about 1.3%: slow but not a recession.

I was in the taxi the other day in Cardiff (home for the weekend) and the taxi driver started moaning about prices, taxes and the economy. Now he started spouting some rubbish about how the rise in fuel prices was all Browns fault (all that tax) when since 2001 the real value of fuel duty has fallen by about 15%, that the country was in recession (it isnt yet and may or may not), and a long list of other grievances, only one or two of which has any actual basis in fact (one being a rising tax burden, although not as much as he thought). I think facts are very important. And statistics, numbers etc are very important types of facts. So you get some idiot saying "people are worse off now compared to 10 years ago" and you can point out that on average, after tax and benefits people are 20% better off in real terms. But if people believe they are worse off, even incorrectly, and they adjust their spending because of thats, its important to take it into account. And thats what I'm trying to do by discussing expectations.

Simple really.

URBANO

Jul 14th, 2008 - 12:26 PM

Re: some positive news at last

Grandeur? Moi? The pot calling the kettle black, more like.

Sorry ,Cambo, I dozed off before the end of your post. I'm happy to leave it to others to judge whether or not you are ,to put it at its politest and mildest,wriggling.

URBANO

Jul 14th, 2008 - 1:31 PM

Re: some positive news at last

Oh...and its you and me, not you and I , by the way

Cambo_Dai

Jul 14th, 2008 - 4:20 PM

Re: some positive news at last

Urbano - a few failed witty 'remarks' to shroud a lack of rebuttal of my posts really is a new low. I suppose a few cronies will chortle but have the graciousness to admit that I am right there: you can both believe in the primacy of evidence-based and sound argument, and a need to take account of others irrationally held views.

I call you and others "arrogant" because you confidently slate an entire profession with very little real understanding about the bredth and diversity of the subject. You proclaim "the end is nigh" with the fervour of a religious nut. You may be right, of course. I choose to confidently proclaim the work of others - and to say: hey the majority-opinion is a serious slowdown, some casualties but not the end. I have been persuaded by the arguments of others. I am not a macroeconomist and so defer to their judgements, and espouse some of their arguments on here rather than stand up on a soap-box and proclaim my own personal theory of everything.

Its always rather trendy to dismiss the "dismal science" - we saw a particularly brazen attempt in the Guardian by Mr Jenkins who went onto attribute every failure and 'crime' of politicians to the economics profession. Indeed it seems we cannot win: if we are cautious and equivocal we are "two handed economists who don't give a straight answer". If we confidnetly proclaim something we are "arrogant". Argh!

James

Jul 14th, 2008 - 4:47 PM

Re: some positive news at last

I don’t see economists as arrogant, but I will say that an economist who can put things in an everyday human context will get my vote anyday. An intense macro economic theory may be correct, but it is all mumbojumbo if people can’t see how it works in practice. I like to think I’m a fairly learned, intelligent sort, with a good grounding in politics and a fair respect for economics, but sometimes stuff is just so theoretical as to be-frankly-useless in aiding thought on how the world works.

Also, there is a tendency for economists to lack a human understanding. The economy is intertwined with society, but it doesn’t and shouldn’t dominate it. An economist may make a dry argument that you are better off to not strike to save your job, but emotions, practicalities of life intervene and render the economic argument irrelevant in the eyes of some, and therefore irrelevant to them.

It’s why I supported the Burberry workers. Who cares what someone at Harvard university has some theory over, at the coal face, so to speak, the reality is you are facing redundancy..either fight it, or suffer the consequences. Economic theory that fails to take account of this is

a/doomed to a lifetime of unpopularity
b/as futile as an argument that says ill-health should be ignored rather than treated. It is human nature to intervene, whether ultimately this is for the best or not.

Also, the question for economists:

Are you favouring a system that makes the most money, or the system that improves the quality of life for as many people as possible? Can they work in tandem? It seems to me that happier societies have mixed economies, with substantial levels of state ownership, and substantial government intervention, but which, outside of this allow business to thrive. Yet it seems, many economists argue against this.

And what I don’t get…

How come the EU, supposedly pro-free trade and seeking lower charges from mobile phone companies when texting abroad? Surely the market has decided that we don’t mind being charged more to text abroad (I genuinely don’t-there is nothing sadder than persistent texters on a beach in Spain) so why the need for intervention here?

Zach

Jul 14th, 2008 - 5:03 PM

Re: some positive news at last

The free market doesn't work. It needs to be helped along by state intervention/subsidies/regulation/free trade rules/anti competitive practice regulations/insider dealing checks/ etc. etc. etc.

Where were all the commentators when the poisonous CDO's were being passed around the world?. In hindsight every commentator and economists were saying that the were bound to go sour, but at the time all financial institution were trading in them. Not to trade in them would have put them at a perceived disadvantage with their competitors. So in a race for conformity the 'Free' Market dictates; you try to follow your competitor as closely as possible.

24 hour News Channels compete with each other but they all look the same, how strange?

The Free Market (aka the illusion of choice)

Credit Crunch

Jul 16th, 2008 - 2:30 PM

Re: Re: some positive news at last

Zach,

How right you are..."The Free Market (aka the illusion of choice)"...or "choice if you have the money", and don't let ANY politician at Westminster or Cardiff Bay tell you "yes, but I can change it". One graffiti artist wrote on a wall once "If voting changed anything, they'd make it illegal", I live by that at every polling day.

Cambo_Dai

Jul 14th, 2008 - 5:37 PM

Re: some positive news at last

TV News coverage in the UK, at least of terrestrial channels is regulated to ensure that it is balanced and unbiased, unlike the newspapers. You could argue that it is regulation that reduces choice in TV news - but if this is manifested in the lack of any Fox News (or its cognate on the left), then its a good thing in my mind.

But there is something that does drive things to the centre - at least in the absense of entry of third parties. Its actually documented most in politics rather than economics and its called the median voter theorem. The idea is that its best to be in the middle rather than the extremes because it allows you to appeal to more people. It breaks down when political extremists can enter - or in the case of markets, niche operators.

The free market doesn't work on its own - but you make an odd-bedfellow for Urbano who seems to fetishize the free market when it suits him. Economics gives us a nice way of analysing when and where markets work less well - and tells us that the 3 key problems are monopoly, externality (e.g. pollution), and information assymetry (harms insurance, and reason d'etre for product standards). But markets DO have nice efficiency properties most of the time, with the price signal, free choice and profit motive far more nimble than a lumbering government bureaucrat. Economics like everyone have political opinions than influence their opinions on things; particularly tax and redistribution. But to economics is about the 'free market' ignores a whole literature, at the heart of the modern subject, than deals with market failure and appropriate ways to deal with it (e.g. pollution permits, monopoly regulation etc etc).

With respect to "making the most money" versus wider goals; economics is NOT all about maximising the market value of goods and services, or increasing company profits. Economics has two sides: a descriptive side, and a normative side. Normative economics provides lessons to what one should do for given objectives. Economists talk about "utility maximisation" and utility can be understood as the objectives of individuals: this could be making money, being happy, healthy, or whatever. Business cost-cutting etc is practised by management consultants, although many economists would broadly support such moves as removing waste and inefficiency ultimately frees resources for use elsewhere. The growth of manufacturing in the 19th century hurt a lot of home artisans (weavers, metal-workers etc) but this allowed progress. Economists typically model consumers and producers having simple goals (e.g. max profits) but this is because it is a useful first approximation and not some prescription of what should be done.

Economists do use their subject and their own opinions to argue for things, however. For instance, in the NHS many economists would argue that fairness means treatment must be based on some rational cost-effectiveness study. Resources are limited and it seems grossly unfair as well as inefficient to spend huge sums of money treating some high profile diseases (e.g. late stage breast cancer) when that money could have a much much bigger impact on improving treatment in other less high profile areas (e.g. mental health). Economists would advocate using some kind of rational system to ensure everyone gets treated equally fairly rather than giving more to those who shout the loudest and who can get the most public sympathy.

Academic economists have been warning about asset prices and credit market conditions for years - witness the continual OECD grumblings about property overvaluation going back several years. In-house economists at several banks have been warning about the risks of underpricing credit risk (the credit crunch is the overreaction to repricing things) but were ignored whilst the party continued. The main problem is most people don't really know what economists do. About 10% of economists may be macro-focussed. The rest are working on evaluating small policies, regulation, competition policy, estimating the effects of taxes on production etc etc. All small "micro" things that feed into policy.

Theres a HUGE misunderstanding about what the subject is about. Its not about inflation, interest rates, exchange rates - at least not primarily.

URBANO

Jul 14th, 2008 - 5:38 PM

Re: some positive news at last

Cambo

Cronies??? Eh??

I've been rebutting your posts consistently.

You took the view that the housing market would hold up. You were wrong.

You emphasised measuring data and evidence based decision making but then attempted to introduce non evidence based factors by way of unprovable assertions (which I think are wrong anyway)about irrational attitudes influencing economic outcomes

Frankly, once one scrapes away the very wordy veneer of your posts they begin to look irrational, inconsistent , even a bit shifty, perhaps.

You've simply got it wrong, perhaps not helped by the fact you've never experienced a real housing collapse or recession. Rather unelevatingly, however, you try to hint that you have really got it right when, pretty obviously, all you have done is try to adopt subtly shifting positions in the light of changed events. So, in the end, you are seen to be no better than anyone else trying to think intelligently about a difficult subject. It's a pity ,therefore, that the tenor of your posts is to suggest that you are bringing something pretty damn special to the party and that the rest of us morons/"cronies" had better listen up.

But let's move on.

Cambo_Dai

Jul 15th, 2008 - 11:02 AM

Re: some positive news at last

Urbano - I don't know what you want from me. I have admitted I was wrong; the housing market fall off over the last few months has been bigger than I and most analysts thought. I've admitted that: do you want some grovelling apology that says that I hereby admit that economics is therefore a useless vocation?

Well I won't. Because the knowledge that a rigorous study of the economy and more generally the economic method are very useful. Economists get things wrong very often because the very nature of the economy is that theres a myriad of variables with effects and countereffects. Its not an engineering system with precise reactions. But more knowledge is better than less and economics is a subject with 200 years of built up knowledge analysing everything from individual decision making to macro-level processes.

You predicted an imminent crash in early 2006. If I had suggested thereby that your "real world knowledge" was useless would you have agreed? I think not. In fact, I don't believe it is useless, but I do object to a view that it is the only worthwhile knowledge. My "theoretical" knowledge is not worthless because in a subject going back hundreds of years, theories only remain in the mainstream if they have some validity. Do you perhaps understand why I fight my case? Because you seem not only to want to say "you were wrong" but that the whole approach, the whole subject matter is somehow superfluous, unnecessary and of no value and this is something I wholeheartedly disagree with. I use and see used by my colleagues economic reasoning to critique, evaluate or support government policy, and our polity is a much better place for the likes of groups like the IFS.

Incidentally, one can test the role of expectations in economics - experimental economics is a subject testing theories using games and finds expectations to be very important, the way questions and info is framed to have a huge impact on behaviour etc. Its amazing how you can manipulate behaviour by explaining the same info slightly differently. A famous case is with doctors who were told the death rate or the cure rate of a drug. Those told the cure rate were MUCH more likely to want to prescribe it.

To make another "wordy" point there are two main types of argument: inductive and deductive. I might give primacy to arguments based in a solid grounding of numbers, facts etc. But where these are sparse you have to use deductive reasoning - based on some logical first principles. And its logical that rational agents change their behaviour based on their expecations of the economy, and these expectations would be affected by the media. Don't try to paint me as some kind of automaton only capable of thinking one way.

Jantra

Jul 15th, 2008 - 12:52 PM

Re: some positive news at last

GROUP HUG!

URBANO

Jul 15th, 2008 - 1:30 PM

Re: some positive news at last

Hope you are not one of Cambo's cronies, Jantra, but agreed!

Jantra

Jul 15th, 2008 - 2:09 PM

Re: some positive news at last

no, i can safely say I'm not a cronie, of anyone or anything

URBANO

Jul 15th, 2008 - 5:27 PM

Re: some positive news at last

Mystifying as to where all those cronies are, then.

Cambo_Dai

Jul 15th, 2008 - 6:00 PM

Re: some positive news at last

With respect to the mobile phone charging the argument for 'regulation' is this.

A monopoly exists on outbound calls between networks: once you are on a network you need to use its infrastructure to call out. Unlike with landlines there are no "third party" options so there is no competition.

The complexity of phone bundle offers means that information isn't perfect: competition can't act on the choice of network in the first place as there is so much to consider.

Hence, there is a lack of competition which means all the supposed benefits of a competitive market (efficient levels of production, no abuse of pricing power etc) can break down. Its a primae facie case for regulation or at least looking into regulation. In a market worth potentially billions the costs of regulation are likely to be outweighed by potential benefits.

Jeremy

Jul 15th, 2008 - 10:07 PM

Re: some positive news at last

Cambo - I think that Urbano is voicing a deep held conviction of many people, that ever since the mid 1980's we have been fed the mantra that the market is always right and cannot be questioned.

I feel that especially in the anglo sphere we have had a lack of political leadership and a failure to look at other disciplines to understand the problems the World is facing.

Take fuel supply in this country where the government has largely left it to the market. The political class only recently seems to have woken to a situation where we are now in dire straits, gas supplies could be uncertain this winter, electricity supply in future years is not in much better shape and UK oil production is in steep decline and world production could be near peak also.

Production of oil and gas cannot increase quickly because of a price signal and demand is fairly in flexible. This could quickly leave the UK and the world in the situation of having a reducing energy budget with a still increasing world population. Difficult to implement alternatives in that enviroment.

Compare that record with Swedens where they have a plan to make the country self sufficient of fossil fuels and have been working steadily for a decade or more towards that aim.

Look at a world where accountants have pressed just in time ordering and delivery as a way of bolstering balance sheets and improving financial efficiency. That is fine when the whole system operates correctly and is not oprerating at near 100% capacity. But in a world where commodity shortages are arising it can lead to industry closing down or shops running out of food. For example world wholesale stocks of copper have been hovering around 4-5 days worth of supply for the past 12 months or so.

While economists have a big part to play in explaining how the system can work and possible affects of changes that can enlighten us all. I just get the feeling that economics does not have all the answers especially if we are not asking the right questions.

The glass is not half empty or half full, it is just broken.

Jeremy

Jul 15th, 2008 - 10:49 PM

Re: some positive news at last

Further to my post above have a look at Gordon Browns recent speech in Paris where he makes mention of the Severn Barrage:

http://www.number10.gov.uk/output/Page15948.asp

Pity he did not take this tack 10 years ago.

Cambo_Dai

Jul 16th, 2008 - 10:23 AM

Re: some positive news at last

Jeremy:

"I think that Urbano is voicing a deep held conviction of many people, that ever since the mid 1980's we have been fed the mantra that the market is always right and cannot be questioned."

Jeremy - like I said, URBANO is the biggest supporter of the free market on here. He's the one who argues for the abolition of planning laws, the primacy of voluntary contracting between individuals etc. Not me. I question the market again and again. I think you really need to read his posts if you think you are on the "same side" of this debate unless his game is simply to always be devils advocate.

And I think the failing lies more in "the people" if this is what many think than in those in power. This government, for instance, has massively increased public spending and redistribution to poor families and pensioners. Thats hardly free market is it? What I see in the last 15 or so years is a pragmatic marriage between the market and the state: state funding but using the lessons of economics and commercial practise to more efficiently organise services.

Jantra

Jul 16th, 2008 - 12:07 PM

Re: some positive news at last

the last 15 years has shown the labour cannot run a piss up in a brewery, never mind the seat of government.

but then can you imagine any dyed in the wool labour supporter agreeing?

Me, I'm not really one for politicking both in work or at pleasure - because quite frankly if most politicians told me it was raining I'd leave my coat at home. Politicians usually follow the mantra 'whats in it for me!' - have you ever seen a politician that lives on the bread line? or only has modest income? they may disguise this as benevolence but quite frankly they become politicians because of what they can get out of it. its the activists who get the respect becasue tehy do it as they beleive in it. Political parites help serve politicians purpose...how often do you hear of politicians swapping parties, it does happen and yet it shouldn't.

Regarding perception of whether the government is doing a good job, I just assess what we pay in real terms in taxation, which is more now that when Labour came to power.

What services have I seen...waiting lists increase, inflation up to about 6-7% (forget the Conmans Perception of Inflation we all know it doesn't take account of the most expensive cost purchases a person will make), violent crime on the (apparent) increase...its hardly a utopian picture...and yet we pay more for the privilege. Can anyone tell me what exactly has become better since the start of the Blair Witch Project?

Tax rises, govenrment losing data (did they fine themselves?), waiting lists increasing, borrowing heavily to fund govenrment programmes, the Tax Credit debacle (trust me on this one its the bigegest cock up ever!)

how about borrowing something like £2.7bn to remove the 10p in the pound mistake which only would have raised £750m...how does that work..why not simply borrow £750m and give it to those that would have been worse off as a result of abolishing the 10p starting rate? So future tax payers now have to pay taxes to clear the £2.7bn - how is that solving the problem.

I remember what was before Labour, and I reckon we were better off, in real terms. Why? Because the Tories may have been inconsistent with their approach, but they did try to create a state whose over-arching belief was that you need to look after yourself, rather than rely on the state - I'm not talking about the sick/poorly/disabled here, wer all have a duty of care to look after those that cannot look after themselves. I do agree there was some sort of 'me' attitude at the time, but I reckon society itself was a bit richer for it. Since Labour have been in power we have seen political correctness go totally crazy H bonkers. Labour lead by policy and its pretty much created a society which nowadays there is very little respect. with that in mind, i feel our scoiety today is worse off than 10 years ago.

Cambo_Dai

Jul 16th, 2008 - 12:44 PM

Re: some positive news at last

I'm traditionally a (New) Labour supporter. I have recently become disenchanted but I will stand up for a lot of good things they have done.

First and foremost, NHS waiting lists and waiting times are significantly lower (particularly for cancer and heart disease) in England at least - it is Welsh Labour that have messed things up in Wales, not the national government.

Schools are much better resourced with additional help for both the very able and those with learning difficulties. There is much more technology available and additional staff to help share the workload with teachers. Huge numbers of schools have been refurbed and rebuilt.

On objective measures, the NHS and education are better; more treated, better survival rates, more resources for schools, a wider range of drugs, a wider range of potential qualifications etc. The problem is although the services are improving, medical technology is advancing even quicker and are expectations. Germany and France spend 10% of their GDP on health - us 8%. America spends over 14%, although about 6/10 of this is private.

With regards to crime - the picture is 'complex'. Differnet measures show different things but you can guarantee the press will always choose the measure showing things worse if there is a conflict. The British Crime Survey is carried out every year and has shown large falls in burlary, car crime, and has shown "violent crime" (includign assaults) etc fall since its peak, although within this certain types have increased. Interestingly with the focus on stabbings we've not noticed a big fall in shootings recently. The media has become a lot more sensationalist with crime, focusing constantly on the current trend without ever discussing successes. Happy news doesn't sell.

And about half of the extra tax revenues has gone to poorer members of society - in particular families with children, and pensioners. The last lot have a bloody cheek moaning all the time when they have been one of the main beneficiaries of this government.

Britons are prize moaners and thats the truth of it. We see other countries through rose-tinted spectacles: the healthcare system of France, the way of life of Spain/Italy etc without seeing the negatives: high taxes and corruption.

You need not support an increase in taxes to fund services or increased anti-poverty welfare spending. And you may argue that money has been unwisely spent - things like the 2005 GP contract, or poor procurement procedures for IT stand out. But you look beyond the scare-mongering headlines and you see a country with improved public services, even if they are not dramatically improved. And don't forget tax rises haven't been dramatic either: from about 37% of GDP to about 39% of GDP.

And with respect to your inflation comment - we have 2 measures of inflation: RPI and CPI. CPI does not include owner-occupied housing costs but RPI does. RPI is a very broad basket and reflects accurately what we all purchase. It weights things according to what the average family spends on each good, and this 'spend' is averaged over several years.

Hence, we may buy food every week and this has risen a lot. But it only makes up about 13% of the average families total spending. We might only buy new homewear goods less frequently but because they are big purchases they make up a similar percentage of spending. The reason it feels prices have risen more than they actually have on average, is that the goods we buy every day have gone up a lot whilst those we buy less frequently have not or have fallen in price. Now theres an argument to be had about whether we should weight more to goods that we must buy - e.g. food - than they actually make in total expenditure. But given we waste about £400 a year in food, and don't exactly get by on aldi basics we can hardly describe our current patterns of food consumption as 'essential'. Inflation is about 4%. It might "feel" like more but that doesn't mean it is more. People are just bad at 'guessing' things like this because they tend to weight too lowly infrequent occurances.

Jantra

Jul 16th, 2008 - 1:33 PM

Re: some positive news at last

Dai

may I be so bold as to offer a response on a paragraph by paragrpah basis:-

(New) Labour brought in devolution, it was their policy. Ergo a direct consequence of that was Welsh New Labour making a mess of things. All in all, Wales increase in waiting lists is New Labours fault.

Speak to the teachers on this forum and those of us who know teachers. Morale has never been so low. Just because teachers have spanking new schools doesn't make the job any easier. Teachers want to teach not fill in forms. We both have differing views on what constitutes efficient measurement (I am an accountant you are an economist) so lets not mgo there. However, in forming your opinion, you surely must give credence to those who teach whether teachers actually enjoy the job or not. If they don't enjoy the job, then the end product (ie the teachin of our children) will suffer.

I do not beleive services in the NHS are improving. Again I bleeive resources are diverted to measure measure measure rather than be where it is needed - at the front line. A colleague has recently had to attend a clinic which her GP recommended 9 months ago. The operation is now due in 6 months. 15 months from GP to operation. Yes it is on eexample and perhaps she is just unlucky. You know I base my viewpoint on empirical evidence and all evidence suggests that NHS times are getting longer.

I agree about crime hence why I said (allegedly - or was it apparently). Where I think we disagree is with resepct to peoples perceptions of crime. I beleive that generally, people think the UK is generally a lot less safe than it was. I also beleive that the police (again) are being stretched due to the obsession of this govetnment with recording statistics rather than fighting crime. Issuing 100 asbos/FPN's/whatever else they come up with does not mean more crime is being solved because 10 years ago because these penalties did not exist.

Agreed about pensioners, they always seem to maon yet they should have realised that by not saving during their working years they would have very little. also, most do not have mortgages and get additional state benefits on top. however, I will say that the most needy should be looked after by the government. families with small childrne, or lone parents (whatever the reason) should be given the same opportunities. What I really meant was tho was tax on average has increased for personal and business. There have been about 400 tax changes since the last election alone.

I'm not really a moaner dai. i beleive in getting on in life yourself. look after number one because no-one else will. i think Britons generally do not moan, its our culture to turn the other cheek. What we are is apathetic and then complain of injustice for five minutes then forget about things. Yes Norway is great, but its bloody cold and they have terrible dress sense. The Germans, well fancy having bread and cheese for breakfast everyday. Sweden/Iceland et al have some seriosuly stiffling taxes. give me good 'ol blighty and day

a tax rise is still a tax rise, is it not?

as for inflation...well all my household bills have risen by more than 4% for the past ten years...all utilities, council tax etc....now in respect of council tax...if the council's wage inflation is less than say 5%, and they raise my bill by 5% to cover existing services, doens't that mean they are getting worse at providing the same service, ergo becoming less efficient.....back to inflation. how about the cost of cars or houses, are they factored in to RPI? These are items bought, albeit 2 biggest purchases, but they do form a signifcant part of an individuals overall expenditure...

All you have to do is look at a typcial income and expenditure rpeort for a bank/HMRC and the costs are as follows:-

Mortage/Rent
Motor Costs
Insurance
Heating/lighting
Other Utilities
Council Tax
Entertainment
Food
Other expenditure for luxuries

now if all costs are rising by more than 4%, then surely inflation is greater than 4% in real terms.

jon has £1000 income of which £900 is for everything expect luxuries. This rises by 5% in a year, whereas wages rise by 3%.

Jon now has £1030 income but living expenses except luxuries of £950, thus meaning he only has £80 spare income, seeing a drop on luxuries of 20% in real terms.

Also factor in that Jon's luxuries have also risen, he gets less bang for his buck, so it is in fact greater than 20% reduction in overall utility.

Of course htese are numbers but what I am trying to get at is generallly costs over the past 10 years in the main gropus have risen by say 5-6% year on year whereas wages have not. You well know that the government will play around with stats to suit but the real figures, ie what people can utilise after essentials, is decreasing, and rapidly so...hence hwy we are now in a period of slowdown.

Cambo_Dai

Jul 16th, 2008 - 2:26 PM

Re: some positive news at last

The cost of cars is included. The price of cars has fallen pretty rapidly - its one of the things dragging down prices for the last 10 years.

Housing is included in two ways - first RPI includes mortgage interest payments and therefore initially rises when the bank puts up rates. RPIX whilst excluding the impact of interest rates includes valuation for both home rental costs, and an implied value of owner occupation of housing. Its not appropriate to include the entirity of the rise of house prices in inflation because only a relatively small number of households move each year. The way you measure the cost of housing to the average person is the cost of servicing their housing costs not by imagining them purchasing a new house every year.

To argue that the flaws of the Assembly are the fault of New Labour is a bit like saying the West is responsible for the Holocaust because it punished Germany too harshly after WWI thereby giving rise to Hitler. Or that Balfour is to blame for 9/11 because his declaration of a Jewish homeland in Palestine ultimately led to deteriating relations between many Muslim Arabs and the West and created the seeds of terrorism. I don't buy it. There are sound reasons to devolve power to more local units - the main objection against being extra admin costs - but the central government cannot be held responsible for the failings of a devolved administration. Its an abdication of responsibility on the part of civil society in Wales if we want both the right to exercise power and then blame others when things go wrong.

If teachers are so bloody miserable why don't they leave? There is a surplus of young teachers for primary schools indicating the lot of a teacher, in South Wales, at least can't be too bad compared with the alternatives. Many public servants are facing the same levels of scrutiny and measurement that has gone on in the private sector - and thats just tough. Anecdote does not suffice for empirical evidence - the figures show, in England and Scotland at least, a better NHS. Even the Economist (who are mightily disappointed with the pace of reform) agree with that and have said that at 60 the NHS looks much healthier than it had thought possible 10 years ago.

We live in a litigious age, and an age where people always want information - parents about their schools and children, residents about crime and punishment in their local area, the media about god damn everything. There is a statutory right to much information now. However, much information is very useful. I was reading Estyn reports for my old school and it described how the headteacher collated reports across subjects for pupils, looking for themes or similar comments so that problems could be addressed across the curriculum. Lesson plans and marking benchmarking ensured that children were treated fairly - with marks not varying based only on your teacher as I remember just 8 years ago.

Lyndon

Jul 16th, 2008 - 4:06 PM

Re: some positive news at last

There was a piece about Welsh waiting lists in Private Eye a few weeks back. Contrary to popular belief waiting lists in Wales and England have fallen at exactly the same rate over the past decade or so. Waiting times in England are lower (but not hugely) because they started out lower in the first place.

This has been achieved in Wales without any headline grabbing gimmicks, pointless hospital reorganisations, part privatization or by bringing in loads of private sector quacks who botch operations that then need to be patched up by the NHS.

Jantra

Jul 16th, 2008 - 4:20 PM

Re: some positive news at last

Dai

I now how it is calcualted, i was being flippant. basically the interest payment of a mortgage in the early years account for very little of what is paid. the capital payment, which forms the lino share, is ignored in all aspects of infaltion measure. that is, the cost of actually purchasing a house is ignored, whereas the cost of financing is not.

what a bizarre method of measurement

Cambo_Dai

Jul 16th, 2008 - 5:29 PM

Re: some positive news at last

The reason that the capital cost of housing is not included is because as an asset it typically (more than) keeps its value. Unlike other capital goods - e.g. a car - which depreciate and hence you can't 'recoup' your money - this is not the case for housing. The capital value of a house doesn't depreciate and is therefore not a 'cost' to a household and shouldn't be included in the 'cost' of living. We could make similar arguments about very special collectors items or other assets that appreciate but these make up a very small fraction of expenditure and aren't worth fussing about. Housing, however is.

Its not a perfect system but its better than including the capital cost of housing. We don't include higher pension contributions in the 'cost of living' because whilst these are assets they are deferred compensation. Its the same with housing - todays housing capital costs are tomorrows gains for downsizers and inheritors.

jantra

Jul 16th, 2008 - 7:56 PM

Re: some positive news at last

Dai

your argument is flawed...it may well be that it is a capital cost....but it is a cost nonetheless, and when capital costs are rising, this does put pressure on finances

Cambo_Dai

Jul 17th, 2008 - 10:39 AM

Re: some positive news at last

Like I said - the actual capital(as opposed to the debt servicing costs) is fundamentally the same as a financial asset. We don't include share prices or the rising 'cost' of pension contributions (as we contribute more to ensure sufficient pensions for our longer lives) in our inflation measure. Because these represent inter-temporal transfers of wealth and not a depreciating asset.

My argument is not flawed.

Jantra

Jul 17th, 2008 - 11:06 AM

Re: some positive news at last

your argument would not be flawed if we all had interest only mortgages but we do not.

when you buy a propety you have to repay the capital you are borrowing, whether on a capital, endowment or some other mechanism.

To give you an idea, my first mortgage cost me £370/month...I now pay £3,216/month

thats an increase of nearly 1,000% in ten years. Yet you do appear to think that the fairies pay the capital cost and not me. I pay it therefore it is a cost to me. As an accountant I fully appreciate how to account for capital items and you attribute the capital cost by way of depreciation or amortisation, even on property.

Now the amortisation charge or depreciation charge (depending on whether you are GAAP or IFRS respectively) has also risen by 1,000%. This is a real cost to businesses...

individuals thenmselves do not care about amortn/depn unless they are sole traders however to them if they see mortgage payments go up they still have to fund it...whether it is a capital cost or not.

perhaps there is a fundamental lack of understanding on how to account for cost and income rather than assuming capital items do not contribute to overall cash flow.

Ignore property...I have a pice of plant and machinery that I want to but this year. It is a wasting chattel for tax purposes, that is, I will be writing down and it doesn't keep or increasein value. It costs me £1m in 2008. I then dec ide to delay the purchase until 2009. Inflation has pushed up the cost to £1.2m...

can you not see that in 2009 I am paying 20% more than in 2008 despite it being a capital item. The real cash cost, and not some accrual concept of matching has seen a real cash increase.

the same goes for non wasting chattels 9ie those that do keep there value such as property, works of art and, wait for it, space stations).

If they cost me more next year than this then their is inflation, depsite how you account for it.

Your argument is fundamentally flawed and is used to fudge the index.

Cambo_Dai

Jul 17th, 2008 - 12:21 PM

Re: some positive news at last

Jantra I'm sorry it is not. Accountants and Economists disagree on several things - for instance the definition of profit. Accountants include the normal return on capital as part of profit, whilst economists would term this simply "interest" (as it could be earned risk free on government debt) and only the profits in excess of this as (super-normal) profits. Similarly with the treatment of historic versus present-value of capital. I haven't looked at the specifics of these differences in definition but they are significant.

Price indices are there to capture the cost of consumption not the cost of investment and asset holding. These are fundamentally different motives for purchasing a commodity. The former is a cost of living, the latter is an inter-temporal wealth transfer in the same manner of a pension or endowment. It is the cost of servicing the debt that is the 'sunk' cost - something that you won't later get back.

I am not going to talk about this further - in this matter I am correct. It might 'feel' like the capital cost is part of the cost and in a purely monetary sense it is - you need more money to buy a house or a painting or whatever later on. But "inflation" is the rate of change of price of consumption and we don't consume housing capital as it tends to appreciate rather than depreciate. We get the capital back. We don't get the interest back. Its a really fundamental difference. Any 'depreciation' in terms of repairs and maintenance is included in owner-occupied housing costs, which is included in RPI.

What we would really wish to do is to work out the expected real appreciation / depreciation of capital that current consumers expect and then add or subtract it from the cost of living. This is really complicated. If we expect current consumers to gain, on average, from housing wealth (e.g. by downsizing later in life) we should actually downwardly adjust the cost of living as they are actually making money from their property. But this process would require lots of assumptions and its simpler just to ignore the capital component. Doing this, if anything, will overstate inflation rather than understate it when we think in a lifecycle context.

I think you want inflation to measure something which it is not: consumer price indices measure the price of consumption. Not investment, which is what the capital component of housing is.

Jantra

Jul 17th, 2008 - 1:18 PM

Re: some positive news at last

the cost of purchasing your house is not an invesmtent purchase..its the cost of buying a house.

the equity you have in your property is not equity until you sell it.

the fact is, the capital element is a cost...If I was born in a stable that wouldn't make me a horse.

I am not wrong Cabmo, lets see how many people on here view the captial element of their mortgage as being a cost to them, or one of investment. Since we are in a bear market we're not seeing growth that you rpeviously used as an argument for ignoring it

Jantra

Jul 17th, 2008 - 1:29 PM

Re: some positive news at last

Dai

you really do not understand the real world in which we live. the man on the stret is not bothered by technical terms..he sees how much money he has to pay to live and how much things cost and his mortgage is his biggest expense without doubt. that is reality, not some government sponsored fudge of what constitutes applicable cost.

answer this...what if I never sell my house? is the capital cost then an investment to me or a real cost? you refuse to engage in this and state simply that 'I am correct' and it smacks of arrogance and an attitude which clearly does you no favours at all. You ay be correct from a techncial economics point of view but I know that businesses who purchase plant and machinery are seeing real cost increases in commerical property and property mortgages and it is squeezing their profits. You have to revalue your assets and amend your depn/amortn charges accordinbgly and if this increases year on year and you have remained in the same property then that is an increase in cost to the business. If business funding is tied to floating charges over assets then the interest element and any capital repayment element is also tied to the value of that building and if it increases in value so do the repayments.

My mortgage has increased, my capital payment have increased, I am seeing an increase in my overall cost of paying for my house. Just like everyone else. It is foolish to deny that mortgage costs are not a cost of living. you have misunderstood. The RPI/CPI/RPIX is usually ignored by most as it is a fudge, nothing more nothing less. Why do you think banks employ actuaries and accountants...so they can forecast the true cost of living - for insureance purposes at least. I've just had a chat about this with the chief actuary at the bank I'm sat in right now and he is in agreement with me on this.

Until it (RPI/CPI/RPIX) covers the true cost of living then it can never be inidicative of what the increase of the real cost of living is.

You are not right, you have read a few text books that say you are gith...man thought the earht was flat once...soon discovered it wasn't.

Kyle

Jul 17th, 2008 - 2:07 PM

Re: some positive news at last

Jantra, are you filling in for Urbano today ?

Cambo_Dai

Jul 17th, 2008 - 2:07 PM

Re: some positive news at last

If you never sell the house the capital will go to those in your will.

Im sorry but its not a pure technicality - there is a very very fundmental difference between a house (which appreciates) and a car (which depreciates). Thats why the latter is included but the former is not. When you sell a house (or pass it on to your beneficiaries) t