From the BBC:
Lie 1: [Nick Clegg] said the collective liabilities of the UK's banks were currently four times larger than the entire economic output of the economy.
Nope. If you are simple minded and merely add up the balance sheets of all UK banks, then yes, their total assets or liabilities appear to be about four times larger than the UK's annual GDP. Notwithstanding that he confuses a 'stock' of money with a 'flow' of money, if you net off all the inter-bank loans (which show up as an asset in the lending bank's accounts and as a liability in the borrowing bank's accounts), you can whittle this down to about one-and-a-half times annual GDP.
And if you pencil in sensible write downs and disposal of 'securities held for sale' (whatever they are), you can get it down to about one year's GDP.
Lie 2: Mr Clegg also defended the rise in VAT, which went up from 17.5% to 20% at the beginning of this month. "The structural deficit was much bigger than we thought [when we came into government] - £13bn bigger (a)," he said. This was the amount of money the rise in VAT would bring to the government, he said (b). "So far, I have heard no answers as to where else this money could come from. (c)"
a) So what? There's at least £200 billion waste in the system, let's shave off a bit of that first. Or for a very quick win, shut down the Dept for International Aid (budget approx £11 billion per annum) or stop paying money to the EU (about £12 billion per annum gross).
b) No it won't. It may well happen that VAT receipts increase by something approaching £13 billion, but if you factor in all the resulting reductions in other taxes and the increase in welfare costs, the net improvement in government finances is closer to zero.
c) How about hiking Council Tax by half, or having an annual Land Value Tax of 0.5% on the current selling value of all UK land (excluding buildings?)
Sunday, 23 January 2011
Nick Clegg: still perpetuating the same old tired myths
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8 comments:
Forgive me if I've got this wrong, but how can any industry be accused of having debt which is four times GDP when they are part of the economy measured for the GDP figure?
Wouldn't that either mean that GDP is a meaningless statistic with which to compare national wealth, or that the banks' assets are substantial enough to counter-balance liabilities when assessing GDP?
D, for a start, don't confuse stocks of money with flows of money.
To use a crude analogy, maybe your house is worth £200,000 and you have a £200,000 mortgage, and you earn £50,000 a year. You could say that your assets (or indeed your liabilities) are four times your annual income (and you would be correct in this).
But it is meaningless to try and add £200,000 'stock' with £50,000 'flow'.
As it happens, banks' cash flows are indeed about £150 billion a year, or about ten per cent of GDP. So it is fair to say that 'financial services consume about one-tenth of national income', or as the bankers would put it 'financial services add one tenth to national income' (but they would be lying as usual, they don't add to GDP, at best they don't affect it and at worst they reduce it).
The point I was making is that banks wildly overstate their own assets and liabilities to make themselves look 'too big to fail' (and they have succeeded in this).
"So far, I have heard no answers as to where else this money could come from."
I never knew Nick Clegg was deaf. Well, you learn something new every day.
Here is another Statement by G. Osbourne that does not stand up to Logic -
From early 2010
"A maximum limit on benefits for those out of work set at the level that the average working family earns. Money to families who need it - but not more money than families who go out to work. "
Considering the definition of the word "average" , Then thats more money than earnt by half of the familes who go out to work.
B, it's not like he's in the same political party as Vince Cable or anything, or even reads his own manifesto.
Den, yup, GO's list of stupid statements is also nigh endless. In fact, we could save time by compiling a list of things he has said which are true and make sense.
Mark, perhaps he's blind as well.
"They would be lying as usual, they don't add to GDP, at best they don't affect it and at worst they reduce it"
Not sure that's right? Bankers do in fact provide a service (regardless of whether you approve of it) that others are willing to pay for. Therefore they generate wealth, just like lap dancing clubs or plumbers do.
AC, OK, I was hamming it up there, of course stuff like cash machines, direct debits and so on make everybody's life a lot easier, and banks (in a controlled environment) match up savers with borrowers and provide liquidity, spread risks etc. This is all good stuff.
But most of this can be or is automated, there is little skill to it. And as has been shown by the whole reckless credit bubble, massive fees for investment banks for sorting out the crap that they created in the first place etc, they destroy huge amounts of value as well.
They are actually parasites, if they just steal the right amount, the economy does OK and they do well, but if they steal too much (and they can't help themselves) they damage the economy and expect to be bailed out, which damages the economy even further.
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