75 minutes (politics)

[Paul Waine]

Hi Paul

Just a quick post before I head to work as both you and Rowls below you seem to have misunderstood my point (or I am misunderstanding yours). I'm replying to you as Rowls just couldn't resist having a little patronising dig in his first sentence.

Scandinavian countries do indeed follow a blend of socialism and capitalism. I'd argue all countries do, but their blend is more heavily socialist. The welfare state may not be left wing, but it is socialist, not capitalist.

And Rowls' contention that capitalism can include socialism but socialism can't include capitalism seems almost mathematically impossible to me. As I say, all countries have a blend of both. His major misunderstanding seems to be thinking that all socialism is communism.

Hi Greenmile, agree with you. It's all about how words are used. My understanding is that the Nordic countries are "sharing" societies, the profit motive and the ownership of assets permits private ownership and private profits. But, when private individuals achieve success, profits, high incomes, they share their success through higher taxes with the rest of society.

On the other hand, Marx and Lenin described communism leading to "socialism." In their case, where the state owned the assets and there was no opportunity for the private individual to achieve success.

The issue with Corbyn is that his socialist model is Venezuela, because at the time he was praising Chavez all the other "socialist" models that had been followed had been proved to be failures. Of course, we can now also see that Venezuela has also failed, dramatically.

Why have UK politicians never aimed to follow the Nordic model? Maybe that was behind Blair's "new labour" - though I can't remember Blair (or John Smith before) expressing their model this way. Maybe it's all about timing: there were many through the 60s and 70s (and, I'd guess before) that claimed the Soviet Union was a "success." Maybe the "right wing" of the Labour party, if they'd had the voice, would have expressed the case for the "sharing" model. Was it the SDLP that split from Labour in the early 80s, when Michael Foot moved Labour to the (unelectable) left? Of course, that group later merged with the Liberals and is now the Lib-Dems.

Have a great day at work. I'm preparing for 2 weeks in the sun and watching the Clarets on Sunday in a bar on the Costa del Sol.

[AndrewJB]

Hi Andrew, you do know what a bond is, I hope? (Corbyn and McDonnell didn't know this before the election). A bond is a "debt instrument," an "I O U." So, if C/McD want to buy the water companies with bonds they are saying "look, here are some government bonds, they are a promise to pay you £X in interest payments and £Y at the end of the period..." One of the advantages of bonds is that they can be "bought and sold" on a stock exchange, so the original recipient of the bond can sell the bond to someone who values the bond higher than the current bond holder. Bonds carry the risk that the issuer of the bond is unable to meet their obligations - i.e they have "credit risk."

How much do you think C/McD bonds will be worth?

What you describe for Thames Water is the same way the Glazers bought ManU. Who owns the assets owned by Thames Water - suggest you take a look at the company's legal documents. Interest on debt has always been offset in calculating the taxable profits which are subject to corporation tax. Generally, it would be hard to argue that a company should pay twice, once to the debt providers and again as corporation tax to the government - if they've only got one pot of money, there's got to be an orderly way of determining who gets which share.

Yes, we can do the "this is ours" argument - it's called expropriation. It has been used a number of times by "socialist" governments. It has also always "ended in tears" - just as Venezuela is suffering today. It will not get us a better NHS, it will not eliminate student debt (it might eliminate students, when the unis are closed down as they also run out of money).

The bonds won't be issued by 'C/McD' but by the UK government (I really shouldn't have to explain this to you), which will also set out the value and terms of repayment. The state will gain assets - ownership of the utilities - and will pay the previous owners for them in a manner that won't disrupt our economy.

One day in the future people will look back on a time when foreign companies owned chunks of our economy, charged us high prices for it, and paid F-all in tax; and wonder at how stupid we were. Need I remind you again, people recently voted to 'take back control'? And none of this means we will end up like Venezuela, just the same as being free market would mean we'd end up like Guatemala, El Salvador, Honduras, Nigeria, Brazil, Spain, Argentina, or Colombia.

This shell game of buying a company, pocketing its value by saddling it with debt, and then paying little or no corporation tax is not a value-add to the country. When Theresa May talked up how good free markets are, I don't think she was referring to this. Adam Smith is probably rolling in his grave.

[Caballo]

The bonds won't be issued by 'C/McD' but by the UK government (I really shouldn't have to explain this to you), which will also set out the value and terms of repayment. The state will gain assets - ownership of the utilities - and will pay the previous owners for them in a manner that won't disrupt our economy.

We can't balance the books now, let alone tackle the outstanding debt. How can we then afford to take on more?

[AndrewJB]

We can't balance the books now, let alone tackle the outstanding debt. How can we then afford to take on more?

If the bonds terms are set far enough in the future, and the interest paid on them pegged very low, it won't constitute an onerous burden. Then, considering the fact the assets themselves generate profits, it can be a net plus.

We can't look at our national finances like we do a household budget. There is no international bailiff who can throw us out of the country. In fact historical precedence is that national sovereignty comes before any money owed by a country. There are many other ways of dealing with national debt other than cutting national spending to repay it. Consider Britain after WW2 - in far more debt as a proportion of the GDP than we are now, and yet we grew the economy to shrink it, and although we had austerity in the form of rationing, we actually created a welfare state, and grew a strong economy.

I believe the current approach of ever more cuts - which we should be able to say that after seven years hasn't worked - will come to an end soon, and we'll go for a more sensible way.

[Caballo]

If the bonds terms are set far enough in the future, and the interest paid on them pegged very low, it won't constitute an onerous burden. Then, considering the fact the assets themselves generate profits, it can be a net plus.

Agreed, however it's generally the lender that dictates the return rate not the borrower

We can't look at our national finances like we do a household budget. There is no international bailiff who can throw us out of the country.

true there is no international bailiff but try defaulting and see what happens to future borrowing rates

I believe the current approach of ever more cuts - which we should be able to say that after seven years hasn't worked - will come to an end soon, and we'll go for a more sensible way.

Depends on your definition of 'worked', we were boring £150 billion a year now we're borrowing 50.

Not trying to pick a fight by the way Andrew, just offering a counter to your rationale

[android]

Andrew, Caballo put it politely but to state it a bit more frankly - the chances of a Marxist government issuing bonds at very low interest rates are zero. Govt borrowing would explode not just due to the buying and spending spree but due to higher and higher interest rates they would have to pay to get anyone to buy them.

If they get in they would increasingly look to expropriate (steal) assets. Corbyn has already hinted at it after Grenfell and didn't Mcdonnell talk about buying assets at less than their value this week. It wouldn't take long for Mcdonnells nicey nicey act to disappear and he would look to theft as the only answer.

[Paul Waine]

If the bonds terms are set far enough in the future, and the interest paid on them pegged very low.....

Then the gov't would have to issue an enormous number of them - unless Corbyn/McDonnell are planning a "smash and grab" taking back control, and we can be sure that won't end well for any of us.

[AndrewJB]

Agreed, however it's generally the lender that dictates the return rate not the borrower



true there is no international bailiff but try defaulting and see what happens to future borrowing rates



Depends on your definition of 'worked', we were boring £150 billion a year now we're borrowing 50.

Not trying to pick a fight by the way Andrew, just offering a counter to your rationale

Agreed on not wishing to pick a fight. We can disagree respectfully.

There will be no 'lender' if the UK government creates bonds to pay for the parts of the economy it nationalises. The UK government will owe money to the current owners, however the details around repayment will be set by parliament, and there's no reason to set these in such a way that makes us struggle to repay.

I don't think we're anywhere near the possibility of defaulting, however countries that have done this have not become pariah states. In fact it is those nations who continue efforts to pay down their debt (Greece for example) that get most stung. It could be said that when Solon cancelled all debts (Athens 590BC), he laid the foundations for the golden age. I'm not suggesting we take a cavalier approach to debt, but that we have some perspective when taking it into account against the national interest as a whole. When I say the present government has failed, I mean by the targets they set themselves, and by the crude methods they've used to try to achieve them.

[Paul Waine]

Agreed on not wishing to pick a fight. We can disagree respectfully.

There will be no 'lender' if the UK government creates bonds to pay for the parts of the economy it nationalises. The UK government will owe money to the current owners, however the details around repayment will be set by parliament, and there's no reason to set these in such a way that makes us struggle to repay.

I don't think we're anywhere near the possibility of defaulting, however countries that have done this have not become pariah states. In fact it is those nations who continue efforts to pay down their debt (Greece for example) that get most stung. It could be said that when Solon cancelled all debts (Athens 590BC), he laid the foundations for the golden age. I'm not suggesting we take a cavalier approach to debt, but that we have some perspective when taking it into account against the national interest as a whole. When I say the present government has failed, I mean by the targets they set themselves, and by the crude methods they've used to try to achieve them.

Hi AJB, can I disagree with you respectfully?

If the UK Gov't issues bonds to Thames Water to pay for TW's assets, then TW is the lender. There's no "magic" about this.

I do hope that Corbyn/McDonnell understand this - I know they showed some surprise when they were informed that issuing bonds would add to the country's debt.

I understand Greece would welcome the opportunity to default on some of their debt - but, the EU/Germany won't allow this to happen.

Take a look at Mexico or Argentina for their situation when each of them defaulted on their sovereign debts. It wasn't an easy time for either countries population.

[android]

Hi Paul, in your example it would be the Thames Water shareholders who receive the government debt (bonds) in exchange for their shares. Mcdonnell has said that badly behaving shareholders (as determined by Mcdonnell) would get less than good shareholders. This is a form of theft and I have no doubt the thin end of the wedge if this guy ever gets his hands on the till.

[Paul Waine]

Hi Paul, in your example it would be the Thames Water shareholders who receive the government debt (bonds) in exchange for their shares. Mcdonnell has said that badly behaving shareholders (as determined by Mcdonnell) would get less than good shareholders. This is a form of theft and I have no doubt the thin end of the wedge if this guy ever gets his hands on the till.

Hi Android, yes, of course, you are right. I'd been thinking of purchasing the assets of TW, rather than the (prospective) Labour Gov't buying TW shares.

Can we assume that "badly behaving" shareholders are all offshore "in tax havens" and may have leveraged the debt to equity ratio somewhat, or is there another definition?

[AndrewJB]

Andrew, Caballo put it politely but to state it a bit more frankly - the chances of a Marxist government issuing bonds at very low interest rates are zero. Govt borrowing would explode not just due to the buying and spending spree but due to higher and higher interest rates they would have to pay to get anyone to buy them.

If they get in they would increasingly look to expropriate (steal) assets. Corbyn has already hinted at it after Grenfell and didn't Mcdonnell talk about buying assets at less than their value this week. It wouldn't take long for Mcdonnells nicey nicey act to disappear and he would look to theft as the only answer.

Why would a Marxist government need to issue bonds?

What Corbyn suggested after Grenfell was that empty properties in the area be used to house displaced residents. In other words borrow them to put them to productive use. I don't think he said anything about outright expropriation. If expropriation of property is theft, then it surely ranks lower in the moral scale than the theft of an individual's labour - which we see with below inflation wage increases for public sector workers. By your reasoning conscription during the world wars was theft. The Enclosure Acts were theft. As was the selling off of public assets over the years for below market prices.

[AndrewJB]

Hi AJB, can I disagree with you respectfully?

If the UK Gov't issues bonds to Thames Water to pay for TW's assets, then TW is the lender. There's no "magic" about this.

I do hope that Corbyn/McDonnell understand this - I know they showed some surprise when they were informed that issuing bonds would add to the country's debt.

I understand Greece would welcome the opportunity to default on some of their debt - but, the EU/Germany won't allow this to happen.

Take a look at Mexico or Argentina for their situation when each of them defaulted on their sovereign debts. It wasn't an easy time for either countries population.

Paul - as you take an interest in South American politics, here's an article on Bolivia's (forced) water privatisation:

https://www.thenation.com/article/polit ... r-bolivia/" onclick="window.open(this.href);return false;

Going back to nationalising the utilities here, what will the current owners be able to do about it if the government make them an offer they don't like?

[Paul Waine]

Paul - as you take an interest in South American politics, here's an article on Bolivia's (forced) water privatisation:

https://www.thenation.com/article/polit ... r-bolivia/" onclick="window.open(this.href);return false;

Going back to nationalising the utilities here, what will the current owners be able to do about it if the government make them an offer they don't like?

Hi AJB, yes, I know a little about Bolivia, it's a poor country and most of the population live in great need.

Re "an offer you can't refuse" - there are international courts that hear cases brought for these types of situations. It is also a "certain bet" that many other international investors - including the people who would lend money to a country - will adjust their risk perspective. In the worst case, investments will be made elsewhere. And, it's almost standard that the cost of UK government borrowing will increase - yes, all two trillion pounds of it - if the risk of lending/investing in the UK is higher.

Have Corbyn/McDonnell costed what that would do to their manifesto? How will that fit with a "run on the pound?"

[bluelabrador16]

Isn't it time that we consider the idea of the public issuance of money/credit, rather than leaving it to the private banking cartel.

How to Waste £445 Billion ...The Failure of Quantitative Easing

"In 2010 the governmentcancelled a program to rebuild 715schools, because they’d run out of money. But at the sametime the Bank of England had created £445 billion of new money through a program called Quantitative Easing. Instead of this money being spent on something useful, it was pumped into the financial markets, benefitting the richest 5% but doing almost nothing to create jobs and stable economic recovery.

So why does the government cancel essential projects because “there’s no money”, while at the same time the Bank of England was able to create more new money than the entire government spends in 6 months? Why is it that the power to create money is used to blow up property bubbles and boost financial markets, but not to do the things that we actually need?......."

http://positivemoney.org/2014/06/waste- ... ing-video/" onclick="window.open(this.href);return false;
https://www.youtube.com/watch?time_cont ... l06RhFoLE4" onclick="window.open(this.href);return false;

An interesting article by Ellen Brown..

Thinking Outside The Box: How A Bankrupt Germany Solved Its Infrastructure Problems

"Schacht .... allowing the government to issue the money it needed had not produced the price inflation predicted by classical economic theory. He surmised that this was because factories were sitting idle and people were unemployed. In this he agreed with John Maynard Keynes: when the resources were available to increase productivity, adding new money to the economy did not increase prices; it increased goods and services. Supply and demand increased together, leaving prices unaffected."

http://www.webofdebt.com/articles/bankrupt-germany.php" onclick="window.open(this.href);return false;

[android]

AJB - not sure what you mean by questioning why a Marxist govt would need to issue bonds. Maybe you mean Mcdonnell is not Marxist in which case I disagree (based on his own words). Or maybe you mean they don't need to issue bonds but that's what we (and they) have been talking about in order to fund their nationalisation programme.

Interesting points on theft/expropriation. Get your frustration at selling off assets at a discount but the problem is there is no market at launch so the govt advisers guess the value and err on the side of caution to make sure the shares are sold. But all buyers of the shares pay the same price (and take the same risk) so I don't see it as equivalent to Mcdonnells good person bad person prices. Defer to your knowledge of Enclosure Acts (confess ignorance although they sound ancient). Corbyn may have been talking about "borrowing" private property. But that and Mcdonnell's talk of forced buyouts at below market value send a sinister message to international investors - hence the CBI observation that they will run for the hills. Consequence will be that govt debt financing will rocket (higher interest rates necessary to attract buyers). I really do believe that Mcdonnell would go for outright expropriation of private property at some point as a necessary step on the path to full state ownership.

Paul - no doubt "tax haven" investors would be a soft target. Doubt whether Mcdonnell realises just who this would capture - including for example UK pension funds who invest at least in part through "tax haven" funds.

[bluelabrador16]

android

"... But all buyers of the shares pay the same price ..."

The city institutions given privileged status in the controversial Royal Mail flotation

"..Priority investors committed to buying Royal Mail at 250p – 80p below the offer price.."

"Some 17 institutions were given “priority investor status” by Goldman Sachs...."

https://www.thebureauinvestigates.com/s ... -flotation" onclick="window.open(this.href);return false;

[android]

Bluelab I think you have misunderstood the link. The "priority investors" would have been the underwriters who would have guaranteed to buy the shares at 250p if the market decided the shares were worse less than that (due to strikes, global disaster, just not worth it or whatever reason). As it happens, the offer price was 330p and the "priority investors" would have paid 330p like everybody else.

I see that 4 years later the shares are now worth about 380p so some increase but maybe they were not the fantastic bargain / taxpayer rip off that critics thought they were.

[AndrewJB]

AJB - not sure what you mean by questioning why a Marxist govt would need to issue bonds. Maybe you mean Mcdonnell is not Marxist in which case I disagree (based on his own words). Or maybe you mean they don't need to issue bonds but that's what we (and they) have been talking about in order to fund their nationalisation programme.

Interesting points on theft/expropriation. Get your frustration at selling off assets at a discount but the problem is there is no market at launch so the govt advisers guess the value and err on the side of caution to make sure the shares are sold. But all buyers of the shares pay the same price (and take the same risk) so I don't see it as equivalent to Mcdonnells good person bad person prices. Defer to your knowledge of Enclosure Acts (confess ignorance although they sound ancient). Corbyn may have been talking about "borrowing" private property. But that and Mcdonnell's talk of forced buyouts at below market value send a sinister message to international investors - hence the CBI observation that they will run for the hills. Consequence will be that govt debt financing will rocket (higher interest rates necessary to attract buyers). I really do believe that Mcdonnell would go for outright expropriation of private property at some point as a necessary step on the path to full state ownership.

Paul - no doubt "tax haven" investors would be a soft target. Doubt whether Mcdonnell realises just who this would capture - including for example UK pension funds who invest at least in part through "tax haven" funds.

A Marxist government wouldn't need to issue bonds, because private property (at least beyond an ordinary person's needs) would cease to exist.

You and Paul highlight something that has been an issue for me for a long time. The need to ensure wealth and the people who own it are kept happy. If, as I'm given to believe, the UK will suffer greatly as a result of instituting policies that are good for ordinary people, but not so good for the rich; then doesn't this tell us the rich are too powerful? There should be no group of people in this country that can by themselves bring the whole thing to its knees. Perhaps if the wealth of the nation were spread around a great deal more, then we wouldn't have to worry if a few of our fellow citizens decided to go elsewhere?

[Juan Tanamera]

You're absolutely right.

He's even more left wing than that.

Is it pledges accounting to £312 billion so far?

All before the country has even started paying off the debt wracked up by the last Labour incumbent?

If Corbyn gets in it will be financial disaster for the UK and the ensuing meltdown will make the "austerity" of recent years look like a time of glorious free spending.

Surely it's time you stopped peddling this myth, Rowls.
The debt 'racked' up by Labour has been multiplied how many times by the belt tightening Tories?

[If it be your will]

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