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Mercutio Nov 13, 2006 8:14 PM

Quote:

Originally Posted by pricemazda
The early 80's recession was caused by monetarism, no one was talking about the ERM.

But even that was her fault, for political reasons she insisted on the pound going in at a high level, despite the treasury and economists advising her otherwise.

And many other advisors said the level wasn't high enough. Hindsight made many fools seem wise. ;)

And Britain's current prosperity owes a great deal to Thatcher's liberalising policies. She rolled back the state, reduced taxes, smashed the unions, encouraged private enterprise, sold off public housing, privatised vast sections of Britain's economy, ceased protection of "crown jewels" (ie national champions), encouraged competition, cleared the dead wood from British industry (British Leyland etc), deregulated the City leading to London's current pre-eminance as a global financial capital (the "Big Bang")....

Her policies were consistently market driven and that, more than anything else, explains why Britain has come from so far behind to now being a margin ahead of the other large European economies in terms of GDP per capita. Thatcher is why Britain is rich and successful today.

Fabb Nov 14, 2006 8:55 AM

Quote:

Originally Posted by Mercutio
Stop deviating from the official line and boosterism of this thread with your awkward facts and statistics. This thread is about fantasy - not fact! ;)

Here's a fact :

Quote:

BERLIN, Nov 14 (Reuters) - German gross domestic product

(GDP), adjusted for seasonal variations, grew by 0.6 percent quarter-on-quarter in the third quarter, powered by foreign and domestic demand, the Federal Statistics Office said on Tuesday.

Although the figure was slightly below forecast, the Office said growth in the second and first quarters of 2006 was stronger than previously reported.

Year-on-year, GDP expanded by 2.3 percent in unadjusted terms in the July-September period, the Office said.

The mid-range forecast of economists polled by Reuters last week was for growth of 0.7 percent quarter-on-quarter. They forecast unadjusted year-on-year growth of 2.6 percent.

"In seasonally adjusted terms and compared with the previous quarter growth drivers came both from abroad and from home: foreign trade gained in dynamism again," the Office said.

"In Germany, both increasing investment and higher spending on private consumption contributed to GDP growth."

The Office said Europe's largest economy grew by 1.1 percent on the quarter in the April-June period, having previously estimated expansion of 0.9 percent. It also revised up growth in the first quarter to 0.8 percent, by 0.1 percentage point.

© Reuters 2006.
The upward revisions are a clear sign of a booming economy. I bet the dismal figure for the French GDP growth in the 2nd quarter will also be revised upward.

pricemazda Nov 14, 2006 10:40 AM

Quote:

Originally Posted by Mercutio
And many other advisors said the level wasn't high enough. Hindsight made many fools seem wise. ;)

And Britain's current prosperity owes a great deal to Thatcher's liberalising policies. She rolled back the state, reduced taxes, smashed the unions, encouraged private enterprise, sold off public housing, privatised vast sections of Britain's economy, ceased protection of "crown jewels" (ie national champions), encouraged competition, cleared the dead wood from British industry (British Leyland etc), deregulated the City leading to London's current pre-eminance as a global financial capital (the "Big Bang")....

Her policies were consistently market driven and that, more than anything else, explains why Britain has come from so far behind to now being a margin ahead of the other large European economies in terms of GDP per capita. Thatcher is why Britain is rich and successful today.

After abandoning monetarism, she embarked on classic keynesian economics. She created a massive credit boom to boost the economy in the short term and used over £280 billion in assets and North Sea Oil revenues to support her expansionist budgets. In 1984 over 15% of the UK budget revenue was from oil.

Ask an economist, and her record is not what you think it is. Don't believe the spin.

jef Nov 15, 2006 7:15 PM

Thatcher was not Keynesian. The credit boom or 'boom and bust' business cycle was supplied by loose monetary policy. Oil revenues are extremely marginal as a proportion of GDP. Thatcher is mainly associated with the structural 'neo-classical' reforms of the goods and labour markets. It took over a decade for these reforms to materialize into lower unemployment and higher GDP growth and eventually higher real income. Most countries have subsequently undertaken similar reforms, especially the Nordic countries.
But when she came into office, Britian was struggling with mass unemployment and falling GDP. Maybe you are too young to remember this. I do although I also admit she made mistakes such loosen monetary policy you were referring to.

pricemazda Nov 15, 2006 8:35 PM

Britain was struggling just like every other developed economy because of the imposition of oil price hikes during the 70s. Which caused the mythical stagflation, low growth, but high inflation.

Thatcher spent her way out of recession. That is classic Keynesian economics

Mercutio Nov 15, 2006 8:55 PM

Quote:

Originally Posted by pricemazda
Ask an economist, and her record is not what you think it is. Don't believe the spin.

The only spin I don't believe is yours. It's politically motivated and factually it's at best selective and at worst a lie. The reason New Labour didn't reverse her revolution is because they accepted that she'd been right, and the left, which had fought against her programme tooth and nail, had been proven wrong. The economists admire most of what Thatcher achieved. Her policies turned Britain's economy around. I saw it happen. Other European economies are belatedly trying to follow the trail she blazed - though often too feebly to achieve what her shock tactics achieved in such a short time.

jef Nov 15, 2006 10:02 PM

Quote:

Originally Posted by pricemazda
Britain was struggling just like every other developed economy because of the imposition of oil price hikes during the 70s. Thatcher spent her way out of recession. That is classic Keynesian economics

You are confusing monetary policy with fiscal policy. Thatcher imposed those free-market reforms to the supply-side whereas Keynes is all about demand. The economic decline begun before oil crises and stagflation was precisely the consequence of Keynesian economics.;)

Nexus6 Nov 16, 2006 11:09 AM

Quote:

Originally Posted by pricemazda
We can deal with market failures, for example global warming is the biggest market failure of them all.

Global warming is no market failure as there was no market for climate or air. Air was free, nobody had to pay anything for it as air was declared to be a common asset owned by nobody and controlled only by the state. And like in case of every asset that is not owned by somebody, humans tried to exploit it to the max without paying attention to the limit of the ressource. And the few leading politcians who in their function as manager of "common assets" were responsible for the quality of the air for decades did not see the catastrophe coming or they intentionally ignored it and the results are known. As a countermeasure humankind only very recently tried to establish a market for air by introducing CO2 certificates in order to stop global warming from progressing further. They did so realizing that only a market with private ownership and competition can ensure effective usage of a resource - and that includes the occurance of market failures, because even with them factored in, the market still works much more efficiently than any other alternative.

Let me once again repeat what I said earlier, nobody is realiably able to identify market failures before all others do. But that is exactly the skill central bankers in the US and the UK assume they have. A case of irrational hybris.

Nexus6 Nov 16, 2006 11:37 AM

http://www.ft.com/cms/s/3ef969a2-73c...0779e2340.html

Robust eurozone growth outpaces US again

Published: November 14 2006

Eurozone growth slipped in the third quarter but outpaced the US again and still showed a robust underlying performance by the 12-country region. Gross domestic product rose by 0.5 per cent in the three months to September, extending an exceptional growth spurt in the first half of the year, according to Eurostat, the European Union’s statistical office. That was slightly lower than expected, dragged down by a poor performance in France, where the economy stagnated unexpectedly....The latest figures also encourage hopes that European economies will continue to grow even as the US slows. The US economy grew by 0.4 per cent in the third quarter, hit by housing market woes.

jef Nov 16, 2006 6:36 PM

I do not see it as a competition between the EU and the US or any other countries - why should it be? After all, the EU needs strong US growth and vice-versa.

pricemazda Nov 16, 2006 10:05 PM

Quote:

Originally Posted by jef
Thatcher was not Keynesian. The credit boom or 'boom and bust' business cycle was supplied by loose monetary policy. Oil revenues are extremely marginal as a proportion of GDP. Thatcher is mainly associated with the structural 'neo-classical' reforms of the goods and labour markets. It took over a decade for these reforms to materialize into lower unemployment and higher GDP growth and eventually higher real income. Most countries have subsequently undertaken similar reforms, especially the Nordic countries.
But when she came into office, Britian was struggling with mass unemployment and falling GDP. Maybe you are too young to remember this. I do although I also admit she made mistakes such loosen monetary policy you were referring to.

Thatcher was Keynesian, she also increased public spending every year she was in office!!! She also cut taxes during a recession (classic Keynesian economics) to boost demand. A she deregulated large sections of industry and business to boost demand. She did this because of her tight restrictions on the money supply with extrememly high interest rates, she boosted demand at a time of little monetary growth. She was a Keynesian by practice, Monetarist by rhetoric.

And Monkey, I too lived through the Thatcher years, and only economists who foolishly believe in the old orthodoxy of classical economics think her record was good.

Anyway, everyone is a Keynesian now, if you believe in the concept of market failures then you are a Keynesian. Keynes also revolutionised economics, as before him, there was no concept of Macroeconomics and the idea of managing the economy.

jef Nov 16, 2006 11:05 PM

Britain's current mix of high growth/low unemployment owes a great deal to Thatcher's free-market policies and supply-side reforms. Like it or not.

Mercutio Nov 17, 2006 2:00 PM

Quote:

Originally Posted by pricemazda
only economists who foolishly believe in the old orthodoxy of classical economics think her record was good.

Rubbish! She is almost universally credited with turning Britain's economy around. Even her Labour opponents did not reverse her revolution once they gained power.
Quote:

Originally Posted by pricemazda
Anyway, everyone is a Keynesian now

No - everyone is laissez faire now.
Quote:

Originally Posted by pricemazda
if you believe in the concept of market failures then you are a Keynesian.

That is not the definition of Keynesian economics!

pricemazda Nov 17, 2006 2:05 PM

Monkey, do you actually know anything about Keynes or classical economics.

In classical economics there is no such thing as a market failure. If you are a classical economist you believe the market is self-correcting and the best course of action during a recession no matter how severe is to do nothing.

Whereas Keynes argued "in the long run we are all dead", meaning within the market are unstable forces which need to be managed otherwise the market collapses under its contradictions.

Thatcher boosted public spending every eyar she was in office. Everyone isn't laissez faire at all, everyone is still Keynesian.

America operates a Keynesian budget, as does the UK.

jef Nov 17, 2006 7:26 PM

Quote:

Originally Posted by pricemazda
In classical economics there is no such thing as a market failure. If you are a classical economist you believe the market is self-correcting and the best course of action during a recession no matter how severe is to do nothing.

Classical economics is an economic theory. Make the distinction with the real life in which, of course, some market failures do exist. We all know that. It does not mean we are Keynesian. Keynesianism died with the stagflation of the late seventies and eighties.

Quote:

Originally Posted by pricemazda
everyone is still Keynesian...

As you should know, budget deficit cannot exceed 3% of GDP in the EU - cfr the Maastricht Treaty.

pricemazda Nov 17, 2006 8:25 PM

America has been following a Keynesian economic policy for years, expanisionist budgets during economic slowdowns, tax cuts during slowdowns.

The fact is without Keynes the very concept of 'managing' an economy wouldn't have happened.

Keynes believed as has been proved right, that capitalism left unchecked will collapse.

Nexus6 Nov 18, 2006 3:21 PM

So why did we see the IT bubble burst then in 2001 and are soon to witness the bursting of the housing bubble if Keynesians are so capable to foresee market failures? In reality they are in fact very bad at it and are often creating and fueling those bubbles. We would probably be better off without them doing anything.

pricemazda Nov 19, 2006 10:24 AM

because in the long run we are all dead.

Mercutio Nov 20, 2006 3:51 PM

There is so much crap on this thread. The Eurozone is not booming. Describing growth of 2 to 2.5% as a "boom" is indulging optimism beyond credibility. And Pricemazda's view, that mere possession of a fiscal policy is proof positive of a new Keynesian consensus, demeans the economist himself (what of the rest of his theoretical model?) and is grossly inaccurate as Keynes's interventionist economics are definitely not in vogue in Europe or anywhere else. Indeed if any consensus is emerging it's that market economics and economic liberalism are more successful. Thatcher's experiments with pure monetarism may have been abandoned but her liberalising policies and faith in the market are being copied everywhere in Europe. Privatisation is merely the most obvious example.

Fabb Nov 20, 2006 5:34 PM

Quote:

Originally Posted by Mercutio
There is so much crap on this thread. The Eurozone is not booming. Describing growth of 2 to 2.5% as a "boom" is indulging optimism beyond credibility.

During the first and second quarters of 2006, the growth of the Eurozone was closer to 4%.
It qualifies as a boom and you know that.


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