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This comment was removed because the moderators found it broke the house rules. Explain.

This comment was removed because the moderators found it broke the house rules. Explain.

And you fail to mention how almost all jobs that do come up go to overseas workers, and the structures at the EU and EU commitments at the international level that are ensuring that, with the effects of:

- driving wages and working conditions down further and further
- repatriating earnings rather than supporting this economy in an earn/spend cycle

Why do you do this? - Just to be 'nice'?
No room for 'nice' if you are claiming genuine analysis

"We've been squeezing wages and allowing credit to be the main driver of economic growth: take away credit and where are we going to get a sustainable recovery? I can't see where its coming from at the moment."

If you squeeze from both ends then something is going to go pop.
As those at the bottom can no longer rely on credit and asset value increases to put bread on the table there is going to be a sharp increase in requests for pay rises.
Don't forget that almost all the food is sold by one of only four major retailers in the UK. It won't be long before the employees of these businesses realise their new found industrial might.

(moderators, the first two posts are obviously blatant adverts, how did these pass moderation ?)

I think you have written the longest economic question ever, Paul.

The crisis is upon us and there is no solution. This is the one I have dreaded all my life and now aged 61 all that I can hope for is that we will muddle through, somehow.

We will not be able to structure any forward progress until we understand the hubris that made this possible: the arrogance of an elite that had got it badly wrong. It is the continued prevalence of that elite in our decision making that is preventing any prospect of recovery. All they want is to defend their vested interests. For as long as those attitudes prevail then there will be no hope.

There has to be radical change at the top and if this does not come naturally then it will have to be forced. Either there is evolution of there will be revolution. The latter is the last resort but we could just run out of time.

This is not just the end of neo-liberalism it is also the death of the British model of social-democracy. For that reason we are going to have to look at European political models and restructure our economy and society accordingly. This could be our `Stunde-Zero'. If you don't know what that means then ask a German. It might be the first thing most Britons have learned from a German but it is a good moral tale as to how a broken people pulled themselves up by the boot-straps.

'In the UK there's been a third factor, standing between this wage stagnation and credit growth: wages at the bottom have been stabilised around the minimum wage; but large numbers of people are in the benefit and tax credit system.'

It is ridiculus that a two parent family with 2 schoolage children where one adult works full-time and one part-time and both are on minimum wage Pay Income Tax and also recieve Tax Credits.

To me, the minimum wage should be raised so that a family in the above situation earn enough so that no taxpayer support is required

Taxpayers have been supporting the shareholders of private companies for years and that is wrong (lower wage bill due to taxpayer support = greater profits to be distributed to shareholders)

PERHAPS IT IS THE DEFINITION OF 'ELITE' THAT IS THE PROBLEM?

On the 'Today' program, Joseph Stiglitz kindly backed me up in my repeated assertion that a nation should be judged by the happiness (I use CONTENTMENT) of its people - GDP IS NOT CONTENTMENT.

While we continue to promote - tacitly and overtly - the notion that money/power, power/money, is VALUE and SUCCESS not only in endeavour, but in life itself, the contentment of this nation (and all others to whom we export our creed, with guile and bomb) will DECLINE.

As if to point up the fallacy, 'Today' gave us the spectacle of 'Cocky' Pete and 'Baccy Baron' Ken - ELITE champions of Labour and Tory governance, playing word games. No more need be said.

An excellent summary of what has gone wrong and its social, political and economic significance. I shall copy and keep this. One small point of naivety is "high street banks that had been sucked into the world of risk." They weren't sucked - they ran with open arms onto the longest gravy train in history where short term rewards ensured many would not have to work again.

Furthermore it is obvious that New Labour taste for Thatchernomics means they are busted and finished but the Cameron alternative is far from attractive. If Labour want to stand a chance in a coallition with Lib Dems they need to ditch laissez faire economics and Brown asap.

Writing in 1972, Henry Wallich, a former governor of the Federal Reserve and professor of economics at Yale, noted:

"Growth is a substitute for equality of income. So long as there is growth there is hope, and that makes large income differentials tolerable."

This quote appears in Wilkinson and Pickett's recent highly important book 'The Spirit Level: Why more equal societies almost always do better', a book that is said to have been gathering lots of sand on the politico beaches this summer - at least, let's hope it was

‘It started in America….’, worth repeating, sounds more lame with every hearing.

So, do bank profits have to be super-taxed to pay for this debt?
I suspect they have to.

I don't think the public will stand for higher personal taxation and lower pensions to pay for something that was not essentially their fault.
They may be prepared to pay for their credit cards and high mortgages, but I reckon -in the new broadband world- that respect for the legislature and the treasury is going to mysteriously erode very quickly, and some refusal to pay the bill is heading our way.

Most people don't realise that, in particular, the younger generation don't really have respect for anything or anyone; and will reject the idea that they have to be poor for the next twenty years to pay for banking largesse.

Of course I could be wrong, they may be as supine as the rest of us.

Regards,

THINGS WE (SHOULD) KNOW WE KNOW (Brown the Yankophile)

I have not checked the detail, but seem to remember Brown used to spend his holidays in America? Might I hazard a guess that, for relaxation, he read all their financial papers and talked to money-mad nerds? OK - even though the money-web is international, and London is a Big Player, let's pretend America could be doing stuff that the money world knew nothing of. BUT IF BROWN HAD HALF AN OUNCE OF MONEY-NOUS HE WOULD HAVE PICKED UP ON EARLY CLUES. So I suggest our problems started with Brown's over-blown view of his own ability and LACK OF SENSITIVITY TO THE WORLD AROUND HIM. It is tar and feather time.

Where will the jobs come from?
We have less than 10 years to decarbonise our economy, so there is plenty of work to do. There's probably a million jobs in a Green New Deal of energy conservation (insulating the housing stock and so on), and building the renewable energy grid. Could be the basis for an export industry as well.
We just need the determination to do what it takes, as exhibited by the leadership to save the sorry skins of the banksters, to save the country and planet from 21st century environmental catastrophe.
The environment does seem to be your blindspot, Paul, as it is for many many economists.

Traumatised Elite Paul?

maybe just mildly shaken,

The current solution of turning on the BE printing press will only penalise the ordinary joe. In the long run this will result in inflation(it always does), and this time it could well be imported in form of higher energy and food costs. At the same time the real value of savings, pensions and assets will be erroded.

Add to this the necessary increase in taxes, and the reductions in public spending and benefits, and the costs of supporting say 3 million unemployed and an ageing population.

The prognosis for most is not an early retirement on an fat pension such as enjoyed by banking and political elites, but a reduced standard of living.

When asked 'what is art' Damien Hurst replied 'what you can get away with' It seems to me this is also true for our financial and political elite.

How do we acieve a more 'honest' economy ?

It's the end of capatalism as we know it....now where have I heard that before

We need to start thinking differently. For instance, what's so marvellous about "work"? For most people it's a necessity to put food on the table and to pay the bills. For a lucky few it's something they really enjoy; for most you just get used to the daily grind and for some it's just plain awful. Private business has started to address the problem of the downturn in creative ways so as to avoid redundancies and they have found ways to share out the work so everyone works a little less and gets paid a litle less. I seem to remember years ago people wondered what we'd all do with the extra leisure time we'd be getting as new technology made our lives easier. The truth is most of us have a new addiction ie to work so instead of working less we worked longer and harder. Like most things in this dysfunctional society we have become, this is just not sustainable and we've all suffered as a result.

If people start to reassess their lives so much the better. We don't need all the "stuff" we are addicted to in the developed world. The country of Bhutan don't use GDP as the measure of their success but instead measure their happiness.

We need to do the same; slow down, work less, buy less "stuff" and enjoy our lives more. That doesn't mean going on a binge drinking session down the pub either!

Proofread! (Ten errors and counting.)
And please, don't do this: "Economist Graham Turner".
When are you going to stop hedging and start writing again? You know, words, strung-together - not numbers and non-sequiturs.

Great article Paul, more of the same please, may I suggest you do a TV docu-drama of the whole episode in the style of C´óÏó´«Ã½'s 'Horrible histories'' (think Monty Python meets the history channel)which should bring the message home and be a lot of fun!

For those unlucky enough not to have seen horrible histories yet it is on Childrens ´óÏó´«Ã½ and is the best prog on telly at the moment as far as I am concerned. The horrible histories team would do agreat job of interpretating this crisis (and others).

I would like to think the posters here have helped you to form the consensus view as expressed in your posting today, it certainly seems to include an awful lot of what has been talked about on here during the course of this chapter.

Thanks for this article Paul and keep up the good work on behalf of the silenced majority (yes thats silencED not silent).

Eh, Paul, dont be too hard on journalists! Take a look at the LSE's Financial Markets Group. Professors Goodhart and Shin lead the way in financial regulation and stability. The Bank of England, the City and ECRSC sponsor these boffins. There was a lot of talk and hot air lavished around. Take a look at the July 2006 FMG Review when eminent speakers such as Andrew Haldane of the Bank of England debated the evils / benefits of Greenspanian / Flat Earthers who reckoned systemic risk was falling cos of clever-by-arf market integration and instruments.On the other hand, was risk taking being encouraged and markets made opaque. Um, well, Andy reckoned that shocks could be less frequent but bigger so " the role of the public agencies is key to preventing and softening the scale of the crisis". We all slept in our beds that night.................

Where is the evidence that 'it' started in America?

My understanding is that 'it' started with the likes of Fred Goodwin and Gordon Brown relaxing central bank responsibility over-seeing of the banking system and politicians hiding behind the bureaucracy of regulation and regulators - and cozying up to the bankers for administration of party political donations and allowing massive bank over-lending and consumer debt levels to escalate.....

it started in the philosophy of greed is good as put forward by the chicago school. Greenspan admitted on TV there was a 'flaw' in his 'model of humanity'.

maybe because it was not a model of humanity?

some still reckon it was divine punishment on the west

so what is the correct model of humanity?

A PROPOSED MODEL OF HUMANITY (#20)

We are an aberrant species of animal - probably the consequence of extreme survival strategy applied during cataclysm. Having moved into an anomalous period of planetary quiescence, we just don't 'fit in'. Too clever by half, we are too wise by zero. Douglas Adams had us summed up - see the Hitchhikers Guide - you won't find a more accurate characterisation.