Doomesday scenario for the western economic system from Niall Ferguson, BBC

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redistribution of wealth is a good thing - but not when governments do it. It is the moral duty of individuals who have wealth to do good with their wealth. Governments are in general a problem Because they are exceptionally bad at handling money - and small government is what we should all be aiming at.
Yes and no - I think medium government.

Our over-social model hasn't been a complete success. But on the other hand - can ppl be trusted to use their wealth wisely? I know in the States (esp Texas?) the wealthy prefer to give rather than be taxed, but would ppl give consistently? I think the fact that they're kicking up a fuss about proposed universal healthcare shows that they probably wouldn't.

The government should redistribute a certain amount that's essential - but perhaps leave more down to the individual than we currently do? Once we've got the debts down and can lower taxes slightly, of course. :p
 

dandelion

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redistribution of wealth is a good thing - but not when governments do it. It is the moral duty of individuals who have wealth to do good with their wealth.
Right now in the Uk a couple of celebrities have been in the news because their accountants have devised fancy schemes to avoid paying any tax. These schemes are considered within the law. The prime minister has become involved, and attacked these people for cheating on their tax returns and doing something which was immoral.

The trouble is, if you argue people should forget the rules and do what is moral, where does it stop? Morally, why should a rich person use the NHS if they can afford to pay for private medicine? Why should a rich person stop at the amount of tax asked for, but instead donate all their money towards paying off the national debt? Is it immoral to use the tax exempt ISA investment system government has created? Morally, poor pensioners should go and jump off tall buildings so they are not a burden on their children. Just where does 'morally' stop?

The reason we have rules is so it is clear what is considered fair. If the rules say you can do a thing, then there should be no moral campaign to do otherwise. Morality and volunteer payments are very bad for this sort of thing. This is a classic 'prisoners dilema' situation, where the government rules about taxation solve the problem of people deciding what is fair giving.

Governments are in general a problem Because they are exceptionally bad at handling money
Absolutely not. Ferguson argued that the british empire and modern wealthy society absolutely depended on the fact governmnets are very good at handling money. Or they can be. Government is entirely neutral. It is the people operating it who are choosing what gets done. But equally, I still see no evidence governments have seriously wasted money: usually they are fighting private industry which is seeking to rob them of it.

The future for every nation has to be either socialist poverty or small government. France has just voted for the former and it will be interesting (and sad) to see how quickly the poverty comes.
I see no real difference between the French plans and the Uk plans. In the terms Ferguson outlines it, the difference is negligible. Fergusons argument is that all western governments and their official opponents are selling the same wrongheaded policies.

- can ppl be trusted to use their wealth wisely?
Ferguson started off by saying yes. Yes, they can be trusted to use their wealth in their own interest. If just a few people have all the wealth then that is exactly what they will do, and to hell with all the rest of us. The interesting question is whether we have returned to this situation where wealth is too concentrated.

But he also said the state must provide the infrastructure to allow them to use their wealth. So that means state services.

Once we've got the debts down and can lower taxes slightly, of course. :p
Ferguson argued living within your means was one of the most important principles of government. Be a while before this happens. decades?

My point was, go to a Tea Party rally and extol the virtues of government redistributing wealth. Or of government taking any sort of action, for that matter.

Then you may want to run. :biggrin1:
I said, I am not american so its hard to argue whether Ferguson is right or wrong. He was making a joke, but the perception of the tea party in the UK justifies his joke. But jokes are always about something which contradicts common sense. Ferguson definitely argued that government is vital.
 
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Doomsday scenario....Gary Glitter is making a comeback. Along with Adam.
 
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Ferguson started off by saying yes. Yes, they can be trusted to use their wealth in their own interest. If just a few people have all the wealth then that is exactly what they will do, and to hell with all the rest of us. The interesting question is whether we have returned to this situation where wealth is too concentrated.

But he also said the state must provide the infrastructure to allow them to use their wealth. So that means state services.

Ferguson argued living within your means was one of the most important principles of government. Be a while before this happens. decades?
Probably. :redface:

I wonder how we reconcile all these things tho? Living within our means individually now, and eventually as a nation - plus bringing the debts down while still stimulating growth and not stifling entrepreneurism.

Also - how dyou get the correct balance between ensuring wealth redistribution and decent services, with responsibility and reasonable tax-paying among the wealthy - whilst not choking business, and allowing wealthy individuals to use their money to better effect than the government might?

Is there a perfect balance? Or does it change constantly depending on the situation (and depending on your point of view)? :redface:

Personally - I'd like to find the optimal level of taxation that's fairest to all, stimulates growth but also ensures responsibility. But - is it absolutely elusive?
 
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dandelion

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I wonder how we reconcile all these things tho?
If I knew that I'd solve all the worlds problems and incidentally get rich myself.

Living within our means individually now, and eventually as a nation - plus bringing the debts down while still stimulating growth and not stifling entrepreneurism.
I think this is impossible. I think the debts will never be repaid and must be finessed away (ie, printing money and inflation). Austerity means no growth, for a very long time, if ever again. What we have now seems to be a balancing act just trying to avoid recession.

Also - how dyou get the correct balance between ensuring wealth redistribution and decent services, with responsibility and reasonable tax-paying among the wealthy - whilst not choking business, and allowing wealthy individuals to use their money to better effect than the government might?
Ferguson says start with honesty in laying out the true situation so we might know what there is to work with.

Personally - I'd like to find the optimal level of taxation that's fairest to all, stimulates growth but also ensures responsibility. But - is it absolutely elusive?
Maybe, but we are definitely off to a bad start by pretending there is not a problem.
 

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No, I think he is warning of a step change. Today the loans are flowing and all is fine. Tomorrow they are gone and so is everything else. That really is the risk.

Perhaps. The assumption here is that the world cannot exist without banks in their current form. But my father's farm will still exist even if banks go bust. The ground will still exist, it will stil rain, the laws of physics will be unchanged, gold gems and precious metals will still be around etc. Even without loans for payroll, etc, there are ways to guarantee value to be exchanged for labor (such as paying with food/shelter, etc). Look to countries of extreme poverty for how the economy would operate in worst case scenario that Ferguson describes, such as Zimbabwe, where I am from. Day to day, most people go about their lives and the black market is quite extensive. Yeah, they don't have the luxuries, but aside from AIDS, if you have your act together and have good survival knowledge, you can have a normal life expectancy. Hence, I said this doomsday saying is highly dramatic.

In any case, we are dealing with fiat money and a lot of things that are only real "on paper." As long as there are some people in possession (by might or right of law) of tradeable goods that have market value, there will be an economy. And history has shown that even following the most chaotic regime collapses, a social order equilibrium eventually returns that allows for systems of trade to develop.
 

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father's farm will still exist even if banks go bust.
And if he can pay workers with potatoes and chickens, thats fine. But if he needs a new tractor imported from america, will they accept a barnfull of wheat in exchange? I agree about this, and so do economists. In 2007 there were various factories making goods. These factories still exist but a good number are now only making half as much. I am sure people still want the goods they used to make, but somehow they can no longer afford them. What happened? This change has to do with 'confidence', because if I spend, then you get the money, then you spend it with jason. then he pays drifter for something..and so on. If anyone stops paying, then no one gets what they want. It also has to do with debt. Debt which has been run up and now has to be repaid, and that at the start of this chain we had learnt to rely on borrowing the money. This has stopped. Sure, in theory the whole system can adjust so that everyone gets less pay for doing what they were doing before, but this is a very difficult thing to do quickly.

Look to countries of extreme poverty for how the economy would operate in worst case scenario that Ferguson describes
Ferguson would say....(I guess), yes, but not effectively. The institutions, banks, law, stock exchange, allow people to amass money and guarantee its safety when you invest it. So much more convenient than a barn full of turnips if you want to buy something or start up a computer software business. What he argued is that it was these institutions which allowed the step change upwards in wealth creation.

such as Zimbabwe, where I am from.
I was curious where you were from....good to have views from different places. But do you reckon life is better there with a non-functional currency? (or do people use other currency like dollars, rand? )

Hence, I said this doomsday saying is highly dramatic.
Ferguson started the lecture with some statistics about how the west had initially lept ahead in economic terms but was now falling back. I dont necessarily think economic stagnation is so very bad when you have already reached a very high standard of living, but what he is saying is we have completely undermined the structures which created the wealth we enjoyed. I doubt many people in the UK fancy digging up their gardens to grow food or getting paid in cabbages. This would be the doomesday scenario.

And history has shown that even following the most chaotic regime collapses, a social order equilibrium eventually returns that allows for systems of trade to develop.
Yes indeed, but the consensus in Europe is that a collapse as you describe and then 50 years to return to the current standard of living is not an acceptable solution to the current crisis. You will have noticed jason describing how horrific the situation is in Greece and we are nowhere near what you describe yet.
 
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Get real...yabba, yabba. Do you see the moon? The Earth is what keeps it in orbit. Yet it would take the Earth to grasp something one sixteenth the size of the moon and wipe us out. Ok...lets continue to argue about poop.
 
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sbat

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And if he can pay workers with potatoes and chickens, thats fine. But if he needs a new tractor imported from america, will they accept a barnfull of wheat in exchange? I agree about this, and so do economists. In 2007 there were various factories making goods. These factories still exist but a good number are now only making half as much. I am sure people still want the goods they used to make, but somehow they can no longer afford them. What happened? This change has to do with 'confidence', because if I spend, then you get the money, then you spend it with jason. then he pays drifter for something..and so on. If anyone stops paying, then no one gets what they want. It also has to do with debt. Debt which has been run up and now has to be repaid, and that at the start of this chain we had learnt to rely on borrowing the money. This has stopped. Sure, in theory the whole system can adjust so that everyone gets less pay for doing what they were doing before, but this is a very difficult thing to do quickly.

My point being that magically, we were able to survive without tractors and modern conveniences in the past. If he needs a new tractor but can't procure one, he'd find a substitute. Something less efficient? No doubt about it! Producing less? Sure. But the best inventions usually come in times of dire need, not when things are running smoothly. :smile:

Ferguson would say....(I guess), yes, but not effectively. The institutions, banks, law, stock exchange, allow people to amass money and guarantee its safety when you invest it. So much more convenient than a barn full of turnips if you want to buy something or start up a computer software business. What he argued is that it was these institutions which allowed the step change upwards in wealth creation.

Again, I am not arguing with the premise that things are more efficient with the current system (when it works as theoretically intended). But human technological/economic/whatever progress did not magically begin day 1 of the first bank. There was progress leading up to it. A different set of global circumstances would have brought progress in a different form. That's how evolution works - life responds to environmental pressures. And I'm sure if we got a lot of smart and creative artists, engineers, philosophers, and saints together in a room, we could come up with a new economic system with new channels for distributing capital.

I was curious where you were from....good to have views from different places. But do you reckon life is better there with a non-functional currency? (or do people use other currency like dollars, rand? )

Heritage is Zimbabwean, but I have called various countries home in my short time on this planet. Birth country and place of longest stay is the US. But yes, in Zimbabwe people of means will generally use pounds, euros, us dollars or rand. But you have to understand, there, the issue isn't the currency, its the fact that the people who have the most intelligence have said "fuck it, I'd rather move to the UK, Aussie, South Africa, Canada, Europe, or the US than deal with this shit." The intelligent people who have stayed are in on the self-destructive exploitation.

Ferguson started the lecture with some statistics about how the west had initially lept ahead in economic terms but was now falling back. I dont necessarily think economic stagnation is so very bad when you have already reached a very high standard of living, but what he is saying is we have completely undermined the structures which created the wealth we enjoyed. I doubt many people in the UK fancy digging up their gardens to grow food or getting paid in cabbages. This would be the doomesday scenario.

Like I said, doomsday is dramatic. Being Zimbabwean, I have seen probably the best example of economic mismanagement on the planet right now. But it's all about standards and one's personal hardiness. Yes, I have a high salary IT job and live in comfort in the US. But if I had to go back to rural farm conditions, I'd do it and get on with things. The hysteria here, I feel, is due more to a fear of having to work harder day to day for basic necessities. In any case, any system has a life expectancy and shouldn't be thought of as a permanent fix because, as I said earlier, environmental pressures change all the time and living things will evolve accordingly or die.

Yes indeed, but the consensus in Europe is that a collapse as you describe and then 50 years to return to the current standard of living is not an acceptable solution to the current crisis. You will have noticed jason describing how horrific the situation is in Greece and we are nowhere near what you describe yet.

It sounds to me like Europeans at large are finally starting to internalize the shittiness of the quality of life in many parts of the world that is a direct result of the system that has created their high standard of living. Greece is at the tip of the iceberg in terms of how bad societal breakdown can get (civil war, food riots, government murdering citizens en masse to maintain order, etc). As a person who has witnessed the worst of Third World poverty in places like India, Thailand, South Africa, Haiti and Zimbabwe, I have very little sympathy.

Further, the consensus in Europe has also been for the state to finance social welfare at a level that is financially unsustainable. All I'm saying is that sometimes there is a gap between the lives that people want and the resources available to make it happen. In any case, Ferguson's argument seems to be that standard for the majority is declining anyway - if so, destructive change is inevitable. Call it a market correction.:smile:
 

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Right now in the Uk a couple of celebrities have been in the news because their accountants have devised fancy schemes to avoid paying any tax. These schemes are considered within the law. The prime minister has become involved, and attacked these people for cheating on their tax returns and doing something which was immoral.

The trouble is, if you argue people should forget the rules and do what is moral, where does it stop?

There will always be clever accountants who can come up with legal ways of minimising tax.

In part the answer is that we need simpler tax systems. Income tax is especially problematic. Can anyone in the UK find a plumber who will take a cheque (ie pay tax)? Is there anyone who fills in a tax return who doesn't scream at the sheer complexity of it? Many have multiple incomes, incomes in different currencies, a variety of eligible expenses, tax codes which seem beyond comprehension and deal with tax offices that make mistakes with alarming frequency. We are very close to a situation where the whole income tax system falls to bits. One sort of solution would be a lowish flat rate, maybe 25%.

In part however the answer is that people need a sense of right and wrong. If you should be paying 45% income tax and an accountant finds a way of making it 1% that should actually ring moral alarm bells.
 
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There will always be clever accountants who can come up with legal ways of minimising tax.

In part however the answer is that people need a sense of right and wrong. If you should be paying 45% income tax and an accountant finds a way of making it 1% that should actually ring moral alarm bells.
Yep. :)
 

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So next lecture. Didnt catch it all, but Ferguson's argument seems to be it is impossible to write regulations which will predict and prevent the next problem, so what you do is punish bankers afterwards severely for their crimes. he recommends we send a lot more of them to jail for causing the last crash. He didnt quite recommend adopting it, but he commended the work of Bagehot about bank regulation. Bagehot: Lombard Street | Library of Economics and Liberty

In particular he mentioned that during a crash you have to provide banks with as much money as they need, but whereas we are doing so at virtually zero interest rates, Badget recommended emergency loans should always be at punitive rates.

He went on a bit of a discussion over new rules to increase capitalisation which may yet cause real problems as banks adjust to the new requirements, but he also expressed a need for new, small banks with much more capitalisation and private owners with a personal stake in the business. he also said these cannot come into existence while the giant subsidised banks continue to crowd them out. He suggested the way round this is for people to choose to use such banks, but it still struck me there was a problem with his dislike of regulation but still wanting inherently safer banks to spring up naturally.

So, which bankers should now be in jail?
 
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Fred Goodwin. Was talking about that the other day.

The RBS situation was unbelievable - taking over ABN Amro without due diligence? What were they thinking? Plus all the sub prime and dodgy portfolio bollocks. Cost thousands of ppl, £thousands - and the govt £billions. Seriously irresponsible and neglectful behaviour.
 

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It's about time people realised that Capitalism doesn't work, it never has and it never will.

Now that the West is in severe decline, some people are finally coming to terms with the failure of the Capitalist system.
 

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Capitalism works just fine thanks as long as there are some strong regulations in place.

Jailing of the violators of the law would help too.