General / Off-Topic Interesting news and perspectives on the economy

[Martlet]

Anyway, I see no reason why any of these things cannot happen under a socialist economy.

And yet they don't. Its not as if we haven't seen socialist nations try, the evidence is that innovation and invention is subdued. After war, profit is the most potent driver of innovation. Even the alturistic and philanthropic businessman starts from the premise of making a profit with which to do their good deeds. Under socialism, the output of effort is shared with those that had no input, so there little incentive to do anything more than the barest minimum.

Anyway, reading the rest of the post i think theres a mis-understanding here, you appear to be advocting democratic socialism, not socialism. Class and inheritance along with holding capital is fundementally incompatible with socialism. I'd argue the priority of socialism is shared, equal ownership, welfare is a consequence, an expected emergent outcome. But we know from experience that this can fail to deliver. Likewise, capitialism isn't about the accumulation of captial, thats just a consequence too, and one much over played as that capital is constantly recycled back into the economy (no capitialist sits on a matress stuffed of cash)

 

[Surfinjo]

:
On the other hand can you imagine how terrible the push bike markets would be if what designs and products were decided by a committee in Whitehall?! No mountain bikes, no suspension, no folding bikes, no BMX's no carbon fibre, just Gentleman's bike mk4, ladies bike type 2 and Childs bike pattern 7 in any colour as long as it's black or red.

I seriously doubt that system of driving innovation would ever be attempted here or anywhere. It was tried in the Soviet Union because many of those states had little experience of innovation, having moved from an almost feudalist society prior to their revolutions. I don't know how much you know of history, but you may recall that, briefly, between 1918 and 1921, there was an experiment with barter. That was abandoned when farmers didn't bother to plant crops because their was no incentive to grow any more than they actually needed for themselves.

Following that disaster, the leaders of the Soviets became obsessed with managing every aspect of the economy, hence some of the more silly innovations such as the fashion committee, made up of selected workers, who were also member of the Communist Party, which met every September to decide upon 4 fashions which young ladies would wear the following spring. Currently, it seems, the idiot running N Korea is trying somehting not dissimilar.

Modern socialism says simply that the economy will be run primarily to provide public services. Not to change society with hair brained ideas. It is the socialism of the Green Party in England, Plaid Cymru and the SNP.

While it is not mainstream and certainly not official policy of any of those partys, there is an increasingly popular point of view which says that Wilson and the post 50s UK Labour Party were in fact Quislings. They deliberately introduced divisive and short sighted notions intended to cause problems and so discredit socialism.

The claims by Healy for example to be squeezing the rich, even though that was plainly stupid and nasty. 98% income tax was another stupid idea. Perhaps the most notorious was the introduction in 1968 of Family Income Supplement which later morphed into Supplementary benefit. You may recall in the late 70s, it became uneconomic to work.

Personally I take the view that socialism was betrayed during the Premiership of Ramsay MacDonald, largely by a sell out of his MPs. I've never been convinced by Atlee.

 

[Surfinjo]

And yet they don't. Its not as if we haven't seen socialist nations try, the evidence is that innovation and invention is subdued. After war, profit is the most potent driver of innovation. Even the alturistic and philanthropic businessman starts from the premise of making a profit with which to do their good deeds. Under socialism, the output of effort is shared with those that had no input, so there little incentive to do anything more than the barest minimum.

Anyway, reading the rest of the post i think theres a mis-understanding here, you appear to be advocting democratic socialism, not socialism. Class and inheritance along with holding capital is fundementally incompatible with socialism. I'd argue the priority of socialism is shared, equal ownership, welfare is a consequence, an expected emergent outcome. But we know from experience that this can fail to deliver. Likewise, capitialism isn't about the accumulation of captial, thats just a consequence too, and one much over played as that capital is constantly recycled back into the economy (no capitialist sits on a matress stuffed of cash)

Quite.

But there is nothing incompatible between Socialism and profit.

The term democratic socialism is a nonsense from the same arguments as the New Labour idea. Socialism can be as democratic as the society is prepared to embrace democracy. Democracy cannot be imposed of course, which is why it doesn't work very well in the ME. But European societies are culturally democratic. England especially has a tradition of developing democracy dating back to the 14th century.

Socialism is simply that the economy is run for the benefit of society. Compared with Capitalism for example, which advicated that the economy will be run for the benefit of the accumulation of capital.

All the other associated notions and clichés are nonsense.

 

[Surfinjo]

(ANTIMEDIA) Iceland — First, Iceland jailed its crooked bankers for their direct involvement in the financial crisis of 2008. Now, every Icelander will receive a payout for the sale of one of its three largest banks, Íslandsbanki.
If Finance Minister Bjarni Benediktsson has his way — and he likely will — Icelanders will be paid kr 30,000 after the government takes over ownership of the bank. Íslandsbanki would be second of the three largest banks under State proprietorship.

http://theantimedia.org/first-they-jailed-the-bankers-now-every-icelander-to-get-paid-in-bank-sale/

Meanwhile, the British way of dealing with crooks:

Updated June 23, 2015 9:45 p.m. ET

LONDON—Senior U.K. bankers will have to wait seven years to collect their annual bonus payments in full under tough new rules released Tuesday.

Three years must pass from the time of an award to receive any pay out, and top bank executives will have a 10-year wait to be sure the bonus won’t be clawed back. Risk managers will wait five years to receive any performance awards in full, while traders and other “risk takers” will have at least a three-year wait.

http://www.wsj.com/articles/u-k-bankers-to-wait-seven-years-for-bonuses-1435058850

 

[beelbeebub]

I agree that we have been, and are being way to soft on banks/bankers. We have a system that effectively rewards risk taking so, surprise! we end up with foolish risks being taken.
:
I was at a wedding just at the dawn of the recent slowdown and lots of the guests were bankers, one was a CDO trader. When I asked about the rumblings on the news of banking problems the consensus was it was a lot of panic over nothing. "some of the old guys are getting worried because they don't understand this clever stuff" was a quote that stood out.
:
Turns out they didn't either.
:
Banking should be a boring utility. It's function to aid the economy by providing wealth storage, money transfer and basic credit.

 

[Surfinjo]

What I find so especially fascinating about all the news coming out of Iceland, about their economy as well as these banking issues, is that up to about 3 or so years ago, the Tory press were predicting the utter destruction of Iceland, claiming its socialist policies wouldn't work.

Like many I had money invested in Icesave, I also had some invested in several Lloyds investments. (They started as separate investments, but Lloyds bought each company, one at a time!) There was an enormous stink about how Icesave had collapsed and speculation investors wouldn't get anything back. I got every penny back from Icesave, but only small fractions to nothing at all from each of my Lloyds investments.

Seems Bjork isn't the only great thing to come out of Iceland.

 

[beelbeebub]

Yeah but the money you got back from Icesave wasn't Icelandic money. It was UK money put in place because so many Brits had money in Icesave. Theoretically you should have lost that money as it wasn't backed by the uk gov, being Icelandic it should have been Iceland that guaranteed it, but they couldn't as the debt level was around the $150k per person. Effectively Iceland defaulted but the investors were bailed out by the various national governments.

 

[Surfinjo]

Yeah but the money you got back from Icesave wasn't Icelandic money. It was UK money put in place because so many Brits had money in Icesave. Theoretically you should have lost that money as it wasn't backed by the uk gov, being Icelandic it should have been Iceland that guaranteed it, but they couldn't as the debt level was around the $150k per person. Effectively Iceland defaulted but the investors were bailed out by the various national governments.

That was one of the claims being made at the time.

In fact, it was the guarantee for payment that was in dispute, not the payments themselves.

Money invested in banks based in the UK is supposed to be guaranteed by the UK government. When the banks collapsed the UK government attempted to claim that they were not responsible for Icesave, even though it had a registered office in London.

Eventually the UK government did guarantee the repayments. Those of us who received a refund did so from the assets of Icesave, not the UK government. More that as well as having my deposits refunded I also received, in full, all the interest accured

I will also point out that investments I had with British financial institutions were not repaid in full. In one case I received slightly more than 25% of my deposit back. The government also refused to guarantee that because they claimed the investment was made overseas. It was in the USA.

That was an investment with Lloyds.

[…]
Darling: Do I understand that you guarantee the deposits of Icelandic depositors?
Mathiesen: Yes, we guarantee the deposits in the banks and branches here in Iceland.
Darling: But not the branches outside Iceland?
Mathiesen: No, not outside of what was already in the letter that we sent.
Darling: But is that not in breach of the EEA Treaty?
Mathiesen: No, we don’t think so and think this is actually in line with what other countries have been doing over recent days.
[…]

https://en.wikipedia.org/wiki/Icesave_dispute#Freezing_of_assets_in_the_UK
.......................................................................................................................
On 28 January 2013, the EFTA Court cleared Iceland of all charges, meaning that Iceland was freed from the disputed obligation to sign a loan guarantee agreement for repayment of Icelandic minimum deposit guarantees worth €4.0bn (ISK 674bn) plus accrued interest to UK and the Netherlands.

The British government was essentially trying to bully Iceland into giveing out guarantees which it refused to give out itself.

https://en.wikipedia.org/wiki/Icesave_dispute

http://www.express.co.uk/finance/personalfinance/65130/Icesave-refund-stuck-in-limbo

 

[beelbeebub]

Hang on, you said "investments" with Lloyds (and subsidiaries) do you mean investments or deposits?
:
Afaik the gov didn't have to pay out (directly) for any uk banks under the compensation scheme (the one that guarantees your deposits​ up to £50k at the time now more with various allowances for joint accounts etc).
:
If you invested via a uk bank then the gov never did and never should guarantee that money.
:
This actually leads me onto a proposal for making banking simpler and safer.
:
Essentially you can have a "guaranteed" account, like any other bank account, cards, chequer book, online, standing orders etc, except that any money in the account is guaranteed by the uk gov. These accounts would have a logo or seal or something to make it crystal clear to customers. Banks who offered this would have to be "rig fenced", i.e. independent entities that only dealt in these accounts. They would be vetted and would also have social obligations, e.g. "homeless" accounts, debt advice etc. The deposits would be deposited with gov bonds paying whatever the interest rate was (i.e. low). In order to make money these banks would charge for accounts and services (except for the "social" accounts they are bound to provide). Effectively the banks would work like a front for premium bonds with all the services of a current account.
:
If you wished a higher return those banks could offer products with their explicitly un guaranteed sister bank, like mortgages, loans, investments etc. all via the same "interface".
:
So I might bank with Lloyds, have an account with "approved Lloyds" for £10 a month but also a chunk of cash in the "uk mortgage deposit" account with "Lloyds Investments (un guaranteed)" paying 2% and some more with the "risky" account paying 6% plus a few share packages.
:
This would give the public access to a solid, reliable, vetted bank where there money is as safe as can be, vulnerable groups would get access to banking, the gov would get access to more lending. People with an appetite for risk could also be served, but if an "investment" bank went pop, the investors would be left to swing because they were investors not depositors.
:
Of course some of the banks did blur the lines between deposit and investment meaning people thought their money was safe when it was in fact invested and at risk. An acquaintance of mine lost a huge amount when their savings, invested in supposed 'ultra safe' bonds, turned out to be Lehman bros bonds.

 

[Surfinjo]

I take your point. As far as I know, everyone who put money into Icesave did so because it paid a very good rate and money was generally put there for the purposes of growth.

That would seem to be an investment. As such would not normally be covered by any protection scheme.

I had a number of such accounts, some with the UK other overseas. One for example, is with the UN! Strangely, none attracted the same reaction from the UK government as Icesave. But then none were featured in the press quite so prominently.

At one point, the UK government even threatened to label the whole of Iceland as terrorist so they would then be able to seize any Icelandic assets.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aXjIA5NzyM5c
http://www.telegraph.co.uk/finance/...-sue-the-UK-over-anti-terror-legislation.html
http://www.nytimes.com/2008/11/02/world/europe/02iceland.html?pagewanted=all&_r=0

The NYT article from 2008 is particularly scathing about Iceland.

On the other hand, the money I lost with Lloyds was all invested when they invited me to do so, from one of my current accounts, because the balance had grown so high. At one point, I was standing at the teller desk when I was asked if I wanted some advice. Expecting a few leaflets, I agreed and was suddenly ambushed by a rather stout fellow with a weird smile and galsses who kinda had a way of talking!

As we all now know, the government's reaction was rather different in Lloyd's case

For my part it was a learning experience as far as investments is concerned, I suppose the same goes for most.

The point is, Iceland is thriving.

 

[beelbeebub]

My understanding (and I cold be wrong) was that icesave was "investment", but because of the fantastic return many Brits had money in icesave accounts, thinking it was like a normal bank account.
:
I think the bailout option was used because the gov wanted to calm any panic to prevent a real run on any uk banks. Icesave was prominent and if the investors (who thought they were savers) lost out then the fine distinction between investor and saver would be lost and a real run could happen.
:
Iceland got into hot water because it's high interest rates made the "carry" trade attractive. Essentially you borrowed yen at the low interest rates, then converted to krona and deposited it in Iceland at a high rate and voilà free money! This made the krona inflate V's other currencies making any krona borrowed from Icelandic banks equal lots of pounds/dollars and hence the Viking entrepreneurs from Iceland buying lots of foreign companies.
:
Unfortunately Iceland's real economy is basically aluminium and fish and only exports about $3bn per year.
:
Mind you if they can find a way to "bottle" and export the electrical power they produce (lithium air batteries maybe) they could do very well.......

 

[Surfinjo]

:
Unfortunately Iceland's real economy is basically aluminium and fish and only exports about $3bn per year.
:
Mind you if they can find a way to "bottle" and export the electrical power they produce (lithium air batteries maybe) they could do very well.......

You may be right.

But they seem to be doing fine and their public services are thriving.

Unlike us.

 

[Surfinjo]

Sweden experiments with a 6 hour working day.

"It's difficult to concentrate at work for eight hours, but with six hours you can be more focused and get things done more quickly," he says.
His staff are at their desks between 8.30am and 11.30am, take a full hour off for lunch and then put in another three hours before heading back to their homes in the Swedish mountains.
They're asked to stay away from social media in the office and leave any personal calls or emails until the end of the day. Salaries have not changed since the initiative started in September.

http://www.bbc.co.uk/news/business-34677949

 

[beelbeebub]

You may be right.

But they seem to be doing fine and their public services are thriving.

Unlike us.

I can't say whether or not their public services re thriving.
.
The tax rates seem similar or possibly even lower, Iceland's figures put it tax as % of GDP in the low 30's%, much lower than the UK's low 40's%. The exact figures vary on source but Iceland does seem to have less tax than the UK.
.
Gov spending as GDP% is also lower at high 20's% for Iceland and mid 40's% for the UK (again depends who you ask)
.
So on those figures Iceland has a lower tax and lower spend economy with a government surplus and has better public services (according to you) than high tax, high spend (and over spend) UK.
.
Would that not imply the Conservatives are right? That doesn't sound 100% right!
.
However, Iceland....
....is more productive that the UK with a GDP/head about 10% higher than the UK
....has greater labour participation (83% vs 78%) than the UK
....has lower unemployment (4% vs 5.5%)
....implied lower dependent rates (young and pensioners not in either of the above figures)
.
All of which make balancing the public books much easier and thus providing better public services easier.

 

[Surfinjo]

Respectfully, you are looking at the matter from the capital perspective.

From a social perspective the issues are rather different.

It's difficult, especially when we have been indoctrinated from earliest times to believe that the interests of capital are paramount and to disagree is somehow anti-social, illogical, foreign. The reality is, a socialist perspective works.

http://www.bbc.co.uk/news/business-34677949

 

[beelbeebub]

No, I'm looking at it from the "how do you pay for stuff" perspective.
:
If you want to provide services for the population (say free healthcare, good roads, lots of police) these items need to be paid for by the government and the gov expenditure must (ultimately) balance with it's income.
:
If the gov runs a deficit for too long, eventually people will stop lending to it. If it defaults it finds it harder to borrow next time, if it prints money to pay it's debts, eventually it will inflate it's currency making buying foreign goods more difficult, a particular problem for Iceland that is critically dependent on imports.
:
Some countries can get away with more deficit spending than others, the US for example.
:
Ultimately it comes down to productivity. The more productive a nation is per capita, the easier it is to provide services. Sometimes services can increase productivity to such an extent they pay fir themselves and more. For example free education provides an educated workforce. Free healthcare provides a healthy one etc.

 

[Surfinjo]

And yet so many states seem to have no problems at all.

Ours, with its enormous national income seems peculiarly unable to afford anything apart for a few billion on renovating Parliament, and so on.

The deficit is a lie. We suffer from chronic mismanagement.

It isn't about paying for luxuries. It's about financing what will earn more for all of us in the long term. A healthy work force can earn so much more than an unhealthy one. Mental health in particular needs an enormous injection of cash. An educated workforce can produce so much more than an uneducated one. Education is life long, not just for children.

The cost of these services is self financing.

The cost of renovating Parliament, Buckingham Palace and so on, is simple expenditure.

 

[beelbeebub]

And yet so many states seem to have no problems at all.

Ours, with its enormous national income seems peculiarly unable to afford anything apart for a few billion on renovating Parliament, and so on.

The deficit is a lie. We suffer from chronic mismanagement.

It isn't about paying for luxuries. It's about financing what will earn more for all of us in the long term. A healthy work force can earn so much more than an unhealthy one. Mental health in particular needs an enormous injection of cash. An educated workforce can produce so much more than an uneducated one. Education is life long, not just for children.

The cost of these services is self financing.

The cost of renovating Parliament, Buckingham Palace and so on, is simple expenditure.

The deficit is very real, in the sense that gov spends more than it earns.
:
The question has to be, given our large gov spend, why do our public services appear so underfunded? Or to put it anther way, why is our bang for our buck so poor?.
:
Can we be so bad at managing things?
:
We do need to adjust our scale though, things like the cost of renovating parliament sound expensive, but in the context of gov spending, it's penny sweets.
:
I had to listen to a ukip candidate bang on about the £55 million a day they would save by ditching Europe with all the pensioners nodding away. When I pointed out that that was less than a pound per person per day and was tiny in comparison to the £2bn a day the gov spends, all he could say was "well I don't know about you but £55 million a day sounds a lot to me", which was kind of my point, if you spent £20 a day it's like saving 5p.

 

[Surfinjo]

The deficit is very real, in the sense that gov spends more than it earns.
:
The question has to be, given our large gov spend, why do our public services appear so underfunded? Or to put it anther way, why is our bang for our buck so poor?.
:
Can we be so bad at managing things?
:
We do need to adjust our scale though, things like the cost of renovating parliament sound expensive, but in the context of gov spending, it's penny sweets.
:
I had to listen to a ukip candidate bang on about the £55 million a day they would save by ditching Europe with all the pensioners nodding away. When I pointed out that that was less than a pound per person per day and was tiny in comparison to the £2bn a day the gov spends, all he could say was "well I don't know about you but £55 million a day sounds a lot to me", which was kind of my point, if you spent £20 a day it's like saving 5p.

No, it doesn't.

 

[Surfinjo]

CLAIM 1
The last government left the biggest debt in the developed world.

After continuously stating the UK had the biggest debt in the world George Osborne admits to the Treasury Select Committee that he did not know the UK had the lowest debt in the G7? Watch: Also, confirmed by the OECD Those who use cash terms (instead of percentages) do so to scare, mislead and give half the story.

Its common sense, in cash terms a millionaire's debt would be greater than most people. Therefore, the UK would have a higher debt and deficit than most countries because, we are the sixth largest economy.

http://www.huffingtonpost.co.uk/ramesh-patel/growth-cameron-austerity_b_2007552.html

What the Huffington Post leaves out is that, since the fall of the Atlee government in 1951, the succeeding Tory government has used these identical tactics.

But the exiting Labour administration has never challenged them.

The behaviour of the Labour administration in the late 70s was outrageous in just how bad it was. You may recall, it ended up, people could earn more from handouts and other perks, free travel, heavily discounted sport and entertainment and so on, than they could working.

Yet the Torys rant is so effective that even intelligent people such as you seem ready to accept them.

That is strange.