Cameron chooses his battleground

geoff

He was good this morning, although I am worried by the detail of the NI cut. Where is he saying he pays for this from? more debt?

Lance Grundy

The Conservatives have to change Labour's narrative. It isn't Labour's 'investment' versus Tory 'cuts', It is Labour's 'buy now pay later' versus Tory 'pay as you go.'

Chuck Unsworth

Well he certainly outperformed La Balls who, frankly, is dire. She seems to have such a childishly simplistic view of economics. And the NuLab mantra of a 'global problem' is steadily being undermined. If Cameron continues to point out the failures of eleven years of splurge, no savings whatsoever, and other countries across the world being in infinitely better positions, that will be just fine. It's time for the Tories to lay it on the line as far as these falsehoods and obfuscations are concerned. Maybe the next move is simply to report what others, outside the UK - like the IMF - say of our current situation.

It's not a question of 'talking the economy down'. It is hard-nosed realism - a concept totally alien to NuLab and its apparatchiks.

As for Cooper/Balls - clearly she believes Brown knows best, or is that Brown nose best?

Short the UK

I am afraid there is not much anyone can do. The debt must be purged. The best thing to do is to follow the Irish and get it over and done with as quickly as possible. South Korea is another example of the correct approach. Policy prescription is just like quicksand. Problem is politicians get paid to do something.

Here is why it ain't goin do much good:

'Financial Values Can Disappear In Deflation

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. "The money has to go somewhere...It just moves from stocks to bonds to money funds...It never goes away...For every buyer, there is a seller, so the money just changes hands." That is true of the money, just as it was all the way up, but it's not true of the values, which changed all the way up.
Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing. Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market "gaps" up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone's action to make it happen, just most people's inaction on the other side. In financial market "explosions" and panics, there are prices at which assets do not trade at all as they cascade from one trade to the next in great leaps.

A similar dynamic holds in the creation and destruction of credit. Let's suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, "a million dollars," and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can't pay it, the value of the note goes to zero. Either way, the extra value disappears. If the original lender sold his note for cash, then someone else down the line loses. In an actively traded bond market, the result of a sudden default is like a game of "hot potato": whoever holds it last loses. When the volume of credit is large, investors can perceive vast sums of money and value where in fact there are only repayment contracts, which are financial assets dependent upon consensus valuation and the ability of debtors to pay. IOUs can be issued indefinitely, but they have value only as long as their debtors can live up to them and only to the extent that people believe that they will.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The "million dollars" that a wealthy investor might have thought he had in his bond portfolio or at a stock's peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears. You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.'

Source: Elliot Wave

Ian C

He got the tone right and the argument. He must just keep plugging away like that, not getting embroiled in the detail and stiking to fiscal conservative principles.

David

Yes, I thought this was his best performance so far. Though you wouldn't guess that from Nick Robinson's Labour love-fest of a blog entry on the subject. Apparently Cameron should have seen this coming - which he kinda did, having mentioned the increasing debt on several occasions. And apparently he has to come up with the answers as well. Gordon Brown doesn't need to do either of these things because he's only Prime Minister and was only Chancellor for 10 years.

Nick

I agree that this was Cameron's best performance so far on the financial crisis. He was particularly good on the fact that although infrastructure spending would be a good long-term investment for the country the unavoidable delays in the planning processes means that this type of spending will have limited impact in the short-term.

And agree with David (above) about Nick Robinson's take on all this. He seems to be holding Cameron to a higher level of blame for the crisis than Brown. How did Brown manage to avoid any flak from the fall-out from Black Wednesday, when it was Labour Party policy to follow the Tory plan of shadowing the Deutsche Mark ?

Nick

I agree that this was Cameron's best performance so far on the financial crisis. He was particularly good on the fact that although infrastructure spending would be a good long-term investment for the country the unavoidable delays in the planning processes means that this type of spending will have limited impact in the short-term.

And agree with David (above) about Nick Robinson's take on all this. He seems to be holding Cameron to a higher level of blame for the crisis than Brown. How did Brown manage to avoid any flak from the fall-out from Black Wednesday, when it was Labour Party policy to follow the Tory plan of shadowing the Deutsche Mark ?

mac

Not sure about the content of Cameron's views, but he certainly conducted himself very well indeed. Any Labour minister would have taken mighty exception to the introductory hatchet job from Robinson before Naughtie got started on his questions. You know the thing, in excrutiating Harmanese sniffiness, Blearsese gabble or Ballsian strop: "I want correct the commentary by Nick Robinson that I or my party blah-blah-blah.

Instead, a very calm Cameron merely mentioned that he 'disagreed' with Robinson's opinions a couple of times as the opportunities presented themselves. Good tactics.

Forlornehope

Where Cameron could have been more forceful was in pointing out that, unless it is going to be a very long recession, very little capital expenditure can come through in time to make a difference. In fact it should arrive just in time to fuel the next bubble. But then perhaps the government is not levelling with the public (that would be a surprise).

oldtimer

Having just caught up with the Cameron interview, I believe he has set out the right response - both in kind and in detail. In the short to near term the issue is cash flow for businesses and individuals. Will they go bust or not?

The Robinson blog is curious. The economic problem is not Cameron`s as his blog headline states. The problem is Brown`s!

I don`t know whether Robinson thought thia up for himself - or whether he has been spoon fed a line by the government spin machine. Either way it achieves the aim of diverting attention from the government`s woes and culpabilities. In short a classic spin operation. One for the text books.

TGF UKIP

The difference between this Tory "opposition" and its pre-97 New Labour counterpart was that Labour was never other than determinedly and professionally political. Every response and action had one aim and that was never to the right thing, it was invariably to do or say the thing which got votes.

Delaying VAT payments and cutting NI by 1% is of marginal benefit to small businesses. It certainly ain't a life or death of a measure to any other than a microscopic few and it most certainly has neither attraction nor relevance to the overwhelming mass of voters.

I've just heard on the World at One that borrowing for the first six months was a record 37.6bn up from 21.5bn last year and set against a March Budget forecast for the whole year of 42bn!

Total debt for this year was forecast at 679bn (27K per household) rising to 771bn in 2010/11 with spending rising from 617.8 (25k per household) to 679.8 bn. Now, with Gordon's new plan to spend and borrow even more where on earth is it going to end - is he going for a trillion would be a good question.

The central and political point about all this, though, is that it gives Dave and Boy George yet another opportunity to finally blow the whistle on their loopy promise to match Labour spending by saying enough is already far too much.

As I posted at the time they had the chance to do this a year ago at the 07 Pre-Budget Statement, then at the Budget and again now they have the opportunity to unshackle themselves.

The polls showed a year ago that voters believed government was spending too much and the majority supporting cutting spending and taxes has been growing since.

What on earth is stopping Dave for once doing the right, the popular and the conservative thing by saying "Government is already spending, borrowing and taxing far too much and the last thing an overspent, overborrowed and overtaxed economy needs is more spending and borrowing and an even bigger tax burden. Stimulus spending is the right way out of a recession but the most efficient spending to achieve that goal is people spending not still more government spending. Therefore, let's prune government spending by just 4%, which is an awful lot less than most families are having to prune their household budgets by, and give £25bn of their own money back to the people via tax cuts."

As many Coffee Housers will immediately spot, though, my case does have one insuperable weakness - the premise that Dave is in any way a conservative.

TrevorsDen

How much longer can we publicly remain silent at the disgraceful behaviour of the BBC in particular ?? This is getting quite ridiculous. Robinson is thinking only of his carer - only thinking of the briefings he gets which would disappear if he excoriated Brown as he deserves.

Money only goes round but its the speed as well which is important (if i remember from my 4th form Economics).

Borrowing is (as just reported) already massively out of the box.

I think Cameron is right since big infrastructure projects will only affect big companies - and not ordinary people and families and small businesses.
And of course the big companies will pay tax and VAT back to Darling.
And eventually there will be a reckoning.
And borrowing will affect the pound and must have an effect on interest rates.
And we have to wonder just how much would be spent anyway - since these programmes will not start straight away - is it just propaganda smoke and mirrors to give a veneer of action?

I think its fair to say the building industry and all its skills need help - but will his not just bring in immigration again not help home grown unemployment? - but maybe some measures or targeted after some better analysis might help.

Roger Thornhill

Of course Labour will splurge now. Public money shoved towards its mates in the construction industry.

In 2 years when the bill start arriving, the Tories will be in power.

I suspect the aim is to make it 1 Tory term.

Kev G

12.14 PM "How did Brown manage to avoid any flak from the fall-out from Black Wednesday …?"

He did what he has always done. He made himself conveniently scarce so that those nasty journalists couldn't ask him any awkward questions. qv Tom Bower.