Who is rioting?

Who would have thought in a time of heavy cut backs in police, military, benefits and community services, in a time of economic crisis, political discontent and global unrest that the UK would see rioting... it sounds so simple when you put it that way but these riots seem to be more a looting and arson spree than a statement of discontent. Its very difficult to take a line, are these people simply mindless and violent thieves or the victims of a society which has failed to deal with certain areas of long term depravity and deteriorating social responsibility.
There is a lot of talking around about what turns a person into a looter or a rioter? A lot of the arrested are criminals that have been perilously arrested, it seems a lot of the looting is simply a result of criminals uniting to over run the police. While there may be some individuals rioting for ideological reason the vast majority are rioting for the pleasure of destruction and reward of theft. These riots may have been started in response to a young man being shot dead by police when he may not have had a gun but now in the 3rd day there is no political reason driving it. 

Pictures like this of a boy being mugged while he bled some up the mentality of the looters; theft.

While these rioters are criminals and clearly need to be dealt with there is an issue, what turned these people to this. In the long term why have these youth's decided the path of criminality is best?
That is a deep social issue and it is linked to unemployment, upbringing, social mobility and education. The areas many of these individuals come from are areas of high relative poverty. These young people have made the decision that they gain more benefit from looting than obeying the law. This is a decision that can be influenced, perhaps if the punishment was worse they would not riot. Perhaps if they had more options. Perhaps if the draw back from rioting came from within, if they believed it was wrong! Dealing with these problem can help reduce crime but the problem is it requires money, something the government is short of. These events are everyone's problem and we are all a little bit responsible.

There are huge negative externalities for all of society to bare if we don't deal with this

At the end of the day, though, these people are not reflective of the UK or the youth of the UK. What ever reason is driving their actions it is uncalled for. What is necessary is control to be restored so mass theft and burning of homes is stopped, what we need to make sure is that we don't give up on these areas of depravity. The worse thing we can do is to label people and write of areas as thug foundries, some say we need a much bigger stick (or water cannon?) but we also need a carrot too. Think short term and long term, cutting back the stick and removing the carrot will only lead to an enviroment for this behavior to re-occur. 

Were to draw the line and what ever happened to left wing

In the recent General Studies paper it asked something along the lines of:
'Labour, Conservatives and Lib Dems, they are all the same, theres no point in voting' 
Discuss wether it is worth while having different political parties. 
The entire premise of my EPQ is about the different philosophies and policies of different parties so this question spurred me into some what of a frenzy of defining political parties, historical examples. Hopefully which will give me quite a good grade at the end, although you can never tell with General Studies and most peoples view on the subject (not mine) are summed (if not a bit roughly) by youtuber: RichandPoor. 


Yet upon coming home I noticed this article: 

Lord Owen 'could vote for Labour' under Miliband

Lord Owen was one of  the key founders of the SDP party that broke away from labour in the 1981s to eventually merge with the Liberal party to found the Liberal Democrats. The fact that he would not support the Labour party makes a complex situation more difficult. 

There was a time when Labour and the Conservatives were clear cut (not that i was alive to remember it)  and it was not too hard to define the Lib Dems but now drawing the political line is very hard! 

Historically Labour were left wing, Conservatives were right wing and the Lib Dems were central left yet right now the Lib Dems are in coalition government with the right wing Conservatives. 

Oh but how right wing are the Conservatives, replacing a flaming touch with a green tree signalled a so called reinvention of the Tory party to the centre. David Cameron trumped the 2010 emergency budget as 'fair' and progressive, but their  polices don't seem to much of a far cry from Margate Thatcher. Experimental economic policy (crowing out theory and PSNCR priority) and downsizing the public sector is classic Tory policy.  Even the Conservative command acknolages this,  this we know thanks to Wikileaks. 

Yet tweaks to the Conservatives to make them friendlier and more electable seem like nothing compared to Tony Blairs New Labour. The reinvention of Labour Party sifted the party of the Unions into a central  Party to Govern Briton for just under 13 years. Tony Blair was named 12th most infuential right winger in the telegraph! Nick Clegg leader of the 'central-left' Liberal Democrats came 3rd!!

What happened to left wing!?

Well Mr Milliband is not leader of the labour party and it seems he is brining back the left. Elected by the Unions Ed is not new labour which means he could just be left of centre? 

If your looking for the true left wing its actually within the right wing government, if you ask me I would say it those Liberal Democrats that risked peerage to vote against the tuition fees. In time we could see the end of the coalition, if the Lib Dems don't break under pressure they will dissolve back into two parties! 

Rebellions and Promises

Tuition fees are to increase to up to £9000 
Yet not with out heavy resistance. 
28 Lib dems voted Yes
21 Lib dems voted No
8 Lib dems abstained or were not present 
This means that less than half of the Liberal Democrats passed the proposals. Full list here.
Also 6 Conservative MP's also rebelled against the fees. All in all the pass of 323 votes to 302 votes was very small. This raising underling problems within the coalistion, as predicted when tested the Liberals Democrats have split. With the Liberal Democrats being an  initial merge of the SDP and the Liberals back in 1988 and now the a divide between the Socialist of the party and the Orange Bookers, is it too unlikely that we could see a break down of the party? Having seen a number of deffections and resignations today so a number of higher profile Lid Dems leaving their posts, mainly Michael Crockart, who quit his government role. This rebellion has further to go.
Mean while Ed Millibands Labour party voted against it the change and is now speaking out against it trying to capitalize upon the situation. 

In the streets
Outside parelment things were far more open and violent! Protesters attacked Prince Charles car, attacked statues, the treasury and battled with police. Police Cavalry charges and protestors throwing  missiles were seen in public violence that would be hard to match in the last 20 years. Who is to say what will happen next? Should further Unions join strikes in 2011 when budget forms sink in it could have devistating consequences. 

UK Debt is not a problem!

Liberal-Conservative coalition is convinced that their emergency tightening of the budget is the right thing and that the economy will cope. I'm not so sure and here is why.

I’d hate to repeat my self on the topic of why the UK economy is a mess… as discussed in my article on the fallacy on the 0.8% growth figure and my analysis on the latest OBR prediction the economy is not doing as well as the present Government would suggest with its policies.
Basic theory dictates if you withdraw fiscal stimulus (low taxes and high Government spending) then you will strain the economy and perhaps knock it back into recession. In this case we have a very weak recovery with a Government about to introduce tax increases, public sector cuts and benefit withdrawal, this would point to economic suicide. But why is the Government doing this? Because the country is ‘bankrupt’ we have the ‘worst deficit in the G20’ a ‘debt time bomb’ and we have to do something about it! Here is a novel idea… how about not bothering about the debt?

101 reasons not cut Government spending (now)

1) Firstly lets look at what economists consider the main objects to target in the economy. 1: GDP growth, 2: Inflation, 3: Unemployment, 4: Balance of payments (money going in and out of the economy). To pure economists these are the main objectives to target, is Government debt one? No... Government debt or what economists call the PSNCR is the 5^th objective that is often omitted from the list. Why bother about it?

2) Ok so just because economists don’t list it, as a main objective does not mean it is important, in fact in resent years focus has been on equality and happiness also. But still number two Government debt does not have a direct effect on the Economy.
3) When a nation goes into recession something know as automatic stabilizers kick in.  These help stabilize the economy but increase Government debt short term. Automatic stabilizers consist of: lower taxes because of higher unemployment, lower wages and less profits and higher benefits to unemployed. A vast proportion of the debt is automatic stabilizers.
4) The UK Government bought out RBS and shares in other banks to stabilize them, this is not lost money! These shares were bought low and can be sold back later… that’s not debt that’s investment.  Bank bail out shares can be sold back at profit!
5) The Government is not anywhere near bankrupt! We have AAA rating that’s far from bankrupt. If we were bankrupt all our money would be worthless
6) The way the Government raises finance is by selling bonds, these are promises to pay the barer the sum of money on a date, these bonds are fixed we have a long time to pay them back. Why not wait?
7) Ahhh but you say that who will buy these shares? Well shares are bought on the bond market, so has this market been more reluctant to trade out bonds? Has it heck! People will buy our bonds. 8) But that’s not the issue, the issue is that our interest goes up because we have to attract people to buy them. True the price is increasing (which is bad) but it is by no means much by international standards and at just under 4.5% it is less than most consumers could get a loan.
9) Journalists like to compare debt to a persons debt… well consider this how much was your house worth when you bought it? How much were you earning? Now work out the value of the house against your yearly salary… that is your equivalent to government debt now. I should image its quite high? Government debt is around 70%.
10) How about me? Well a rough estimate tells me after I’ve taken my university loans and worked out my income its rough estimate of 660%. Oh no I best panic and sell my laptop… what!?
11) This is a key one: DEBT IS REDUCED WITH TIME – INFLATION ERRODS DEBT. Take out a loan for £100 now, and spend it when you come to pay it back a  year later assuming inflation is 2% your debt is worth 2% less because the person you are now paying £100 too will need £102 to buy what you bought with it last year. That’s inflation!
12) So remember that figure of 4.5% interest on Government bond repayments. its actually 2.5% if you negate inflation. That’s assuming inflation is 2%. It is actually 3%+ at the moment.
13) Compared with the past our debt is minimal:

14) compared to recent past it is minimal:

15) Debt is at a fixed point in time. If our debt is 60% of GDP in 2010 by 2030 it is likely out economy will have grown by 40% so the debt will be proportionally less of our countries income when we come to repay it.
16) If we cut spending now we will lower Government spending that will lower AD (total demand or spending) which will lower GDP17) If we cut spending now we will cause unemployment, like the 2+ million predicted from the budget.
18) If we increase unemployment we will likely increase crime.
19) If we decrease public sector budgets there may be union action20) Cuts to infrastructure will damage UK business! (damages AS)
21) Cuts to the education system will mean the next generation will have less knowledge/skills so the economy will suffer in the long run. (reduction in supply side)
22) People made unemployed in the public sector will spend less money, so those in the private will suffer! 23) People with less benefit will spend less money, so those in the private will suffer!24) The last time we were in this situation we found our self in a depression then WW3…
25) maybe we should not cut our military in just in case.26) Increasing Taxes such as VAT to 20% is recessive creating more inequality.
27) If we go into double dip the automatic stabilizers that are out of the Government control will increase making the debt worse!
28) If we continue to support GDP by spending then automatic stabilizers will fall and are falling! 29) Government deficit is already falling; even without a budget slashing Spending things will begin to get better.
30) Next time the economy is in ‘overheat’ we can reduce spending to stop a positive output gap and prevent another recession. 31) Next time we have high demand pull inflation we can deduces spending to create a positive Government account and pay back some of the debt and sole inflation problems.
32) Ireland is in economy difficulty and so it 33) USA this means we will have less exports to these countries and they are our main exports. This is bad for the economy Government needs to make up for this fall in exports.34) House prices are falling, this is a signal that the economy is becoming heading towards recession, surely this would suggest we do not have a strong enough to take the hit of cuts. 35) Equally consumer spending is falling36) Unemployment is a lagging indicator, so if we go into a double-dip which theory states we may do if we cut back now then unemployment will only get worse and say like that for a long time.
37) Those employed by the public sector have skills that are not valued by the private sector! Crowding out theory suggests the private sector will create jobs with cut backs, how can this happen. What kind of private sector business wants to employ millions of civil servants? 38) Those unemployed require training to get back into the labour market, how can they do this with increased tuition fees, less adult education etc..
39) The longer people are unemployed the more their skills depreciated, the focus should be spending to get unemployed back to work not creating more unemployed making it more competitive for people to find jobs.
40) “the number of vacancies for the three months to October 2010 was 453,000, down 27,000 over the quarter” –ons Where are the jobs for the unemployed and soon to be unemployed?41) Front line services will be cut WITH implications to their service provided.
42) Government bonds are sold to the general public, the government represents the public. we owe our selves money? – a bit of  a silly argument granted. However:
43) The UK created £200bn in Quantitative Easing, the other name for this is Asset purchasing. This means we purchased £200bn worth of bank and Government debt. The proportion we bought from the Government can be written off.
44) If we do go into a double-dip then we can’t lower interest rates to raise AD and help us back into recovery because they are at 0.5%
45) Equally if we go into double-dip it would cost more to launch a new stimulus package to bring us back to positive growth than it would be to simply wait before cutting the debt

At this point the time opportunity cost of listing another 56 would out weight listing them so I will chose to stop this list here… 

The point is why are we so concerned about this debt! Yes it is a problem but we can pay it back later when we have good strong growth, as Labour should have done during the recent boom.

Another interesting read on the subject can be found on the Hutton Economics Society website: The National Debt? Timebomb?

The fallacy of 0.8%

Some predicted 0.6% GDP growth, some predicted 0.4%, what did we get: 0.8%. Fantastic news, it would appear George Osborne's faith in the economy coving the back lash from the public sector cuts was correct.
George Osborne needs around 1 million jobs to be created, with the 0.8% growth came an decrease of 0.1% of unemployment. The Economy is creating jobs! So all the predictions of double dip, all the apocalyptic judgements on the spending review are wrong, its all up from here.
NO

What Mr Osborne will not be drawing attention to is that these figures are from the 3rd quarter, thats July, August and September. This is way before the spending review get chance to sink its teeth into the economy, it is in fact its before the new Government had done anything. The Con-Dem rejoice they really should be thanking the past Government. I'd go as far as saying this 0.8% is the fall out of the stimulus package that has now been reversed.
If your looking for more practical evidence not to get your hopes up, consider this.
Office for national statistics:
-Government and other services rose 0.6 per cent
-Construction output rose 4.0 per cent in the third quarter of 2010, compared with an increase of 9.5 per cent in the previous quarter
Construction is on the slide from the previous quarter indicating a downwards trend, the cancelation of Government contracts is not yet applied to these figures (with them being out of date) and other indications such as slowing housing market appeared after these figures have been calculated.

3rd quarter of 2008

 Construction is a large chunk of GDP if it starts to decline it could multiply across the whole economy. The 0.6% growth in Government services is almost certainly going to decline with the spending cuts. Then manufacturing will decline in the 4th quarter as well as there will be less demand for manufactured goods in the public sector (e.g: Fighter Jets..) and export demand for manufacturing is shaky with Europe  on the brink of a second economic collapse.

Don't be too quick to make judgements at first glance from one figure, analysis. I'm standing by my predictions of a double-dip.

Its the young that are paying the price

The budget review is going to hit everyone pretty hard but it seems that there is one group being hit hardest, the young!

So far we have had confirmed that child benefit will be withdrawn from top earners, this is no bad thing in the sense that is moves towards a progressive tax/benefit system but it is just the first line of the policy targeting the young.

Secondly we have reforms EMA that could see many students loosing out. What ever your thoughts on EMA its not likely to go down well with those students loosing it.

Education slashes loom, if not in this review but in the near future. Again the true losers in this are the students, the NUT predicts the loss of specialist staff first, those that deal with behavioral and special needs.

The tally of cuts won't just affect those in education what about those just left education, those trying to buy their first house. Th Government reforms to the housing budget are going to make it, you guessed it, harder than before. 30,000 new 'affordable' homes were build in the south east and London last year and the latest prediction shows that in the next 5 years the government is unlikely to fund more than 250 new homes. The only hope is that the housing market will come down. While prediction are pointing the market that way the draw back is it normally a signal of a looming recession.

"The total number of 18 to 24-year-olds out of work for two years or more rose to 72,000 in the three months to June, up 11pc on the previous quarter, according to the Office for National Statistics (ONS)." -Telegraph

Youth unemployment as a result of the recession is clear to see and t it will only get worse if we going into a double-dip recession. I know that many of my peers find it hard to get work, I've found my self struggling to get work as a direct result of budget cuts to the police.

Majourty of students expenditor is on a small luxary items (video games) or cloths and a lot on books as well. The VAT increase will proportionally hit the young harder, especially with talk of it being applied to books and clothes now.

Then there is the big one, the hit that will take money directly out of the pockets of students and laden them with debt, Tuition fees. It’s looking like tuitions fees will be raised from £3,225 to £7000, over doubling! This means over double the debt, it seems the deficit is being shifted from the government balance to the accounts of students.

Its those that did not cause the credit crunch or rack up the debt that are now having to pay for it and the Conservative party will have to be careful, the young are the voters of the future, something Labour are exploiting given the circumstances stated above. Perhaps also Mr. Cameron should also be wary of students, student unions can be quite militant and in France we've seen their student unions joining mass strikes, the often fiery youth could come back to give the Prime Minister a nasty burn.

The Historian

"A historian is a profit in reverse"

Always a favourite quote of mine and now it seems to be more relevant than ever.

Were we are now
With the spending review just around the corner questions are being raised as to what it will mean for the UK economy.The UK has a national debt of around 950 billion (that's: 950,000,000,000!!), this staggering figure is the problem now facing Chancellor George Osborne but what is he going to do about? This is the question on the mind of many, will raising tuition fees be part of repaying the debt, cancelling child befit is certainly one part of it.
The front line services such as police have already begun making cut backs and other areas of the public sector cringes in the knowledge its almost certain to see heavy job loses.
George Osborne may be cutting back to reduce the budget deficit but what will happen to the Macro economic objectives? Government spending (G) is a key part of Aggregate demand (AD), plotting a reduction in G and thus AD on a Long Run Aggregate Supply (LRAS) has the effect shown bellow:
Output falls from O to O1 and thus GDP falls.. the economy goes into recession! Surely George Osborne knows this? Well a major part of the conservatives plan on keep the economy afloat release a theory called crowed out, as explained in full by a fantastic article written by Joe RS: Joe's Article. Basically the Government expects the private sector to fill in the gap as they deplete the public sector, a valid theory. However this only possible if businesses have money to expand, something which is about to get a whole lot harder if the Monetary Policy Commity decides to raise interest rates!
Has George Osborn factored this into his theory? It certainly raises questions as to how qualified he is to run the economy, lets find out:

The Man in charge
Name: George Gideon Oliver Osborne
Age: 39
Born: Paddington UK
Degree: Modern History.
Job History:
NHS: recording deaths
Selfridge's: Tidying towels
The Conservative Party
Experience in Economics (including GCSE ):
NONE

Anyone else shiver at the sight of that résumé, Well the city of London for a start! On the positive side every single one of you now reading this probably can say: "I have more experience in economics than the man in charge of the UK economy!" So how did he get the job.. well another Quote springs to mind, this time by Benjamin Franklin exasperated by politics:
"Democracy is two wolves and one lamb voting on what to have for lunch"
Alas more fitted for the present times would be:
"Two politicians and an economist voting on what to do with the economy"
At least there is one good thing, if he studied modern history he should be able to tell us about the 1930s.

The Past
During the period of 1930s the world economy was in a state of depression, in the US this was know as the great depression lasting from 1929 to around 1939 while the UK's problems started in 1918 but were not quite as bad by the late 1939s.
Economic growth was negative, between 1918 and 1921 there was a fall of 25% in output in the UK! The Government debt was large and the government was pressured to lower the deficit, this didn't help the economy!

Many nations were pinned down by something known as the gold standard that fixed their currencies so they could not export effectively.
As a result of the economic depression extremism increased, the Nazi party rose up in Germany and to a lesser extent in the UK, the KKK became stronger in the US and in Italy and Spain far right dictatorships rose up. Eventually Adolph Hitler rose to power in Germany and consumed Europe in war.

The future? (The apocalyptic edition)
World war 1 = war on terror
The Gold standard = The Euro
Economic down turn = Credit crunch
Right extremism = Tea Party Movement, BNP etc..
Government cut back? = Spending review?
World war 3 anyone?

OK so that's the extremest prediction possible (unless we look back the fall of Rome), but there some merit in looking back at the past to judge the future, there are many similarities to then and now and Keynesian models suggest these cut backs will lead to bad times ahead. We have to learn the lessons of the past, lets hope George Osborne did in his history classes. A final quote to consider:
"History repeats itself because no one was listening the first time"

Good Morning Mr Cameron

We now have a new PM David Cameron but also a deputy PM NIck Clegg.. what does this mean? We have a right wing PM and a left wing Deputy PM.. can this work?
Business:
The FTSE 100 Index was previously in free fall seems to be stabilizing but is still on the fall, this could show that the new coalition has yet to gain the support of business.
The pound however has risen from a sump of 1.47 against the dollar to just under 1.5, this shows that the deal has been positive but the pound is still far off 1.54 which it was at the start of the month.
Culturally:
Its difficult to tell what the people think of this deal, many die hard Torys and Lib Dems feel betrayed but it is generally seen as a good decision by most I believe as at least we now have a government... although facebook polls showed most people wanted a lib-lab coalition and if not a re-election with only a small proportion wanting a Lib-servitive coalition but facebook does not represent the whole population. Perhaps this is one of the challenges to David Cameron, trying to persuade the youth that Torys are not evil! He will also face scrutiny Europe for his parties allegiance in the European parliament.
Economically:
We don't know what the result of this deal will be, many labour supports believed Tory cuts would cause a double dip recession... this is unclear at the moment but they have stated they will not increase Nation Insurance or and will seek to alleviate tax on lower earners which though theories of Fiscal policy is good for the economy unless we already have restored Aggregate Demand to is former level in which case it could lead to future inflation. Inflation is something to watch
What ever happens we can expect interesting times ahead, some think this coalition will fall apart and we will soon have a re-election but what is certain these two men have a hard time ahead.

Goodbye Mr Brown

Today we see the end of new labours grasp on UK politics, amongst the chaos of the hung parliament I for one would like to take a moment to think of Gordon Brown.
Gordon Brown resigned as Prime Minister of the country and of the Labour party at 7:20pm on the 11th of May. As long serving chancellor and PM through a recession Gordon Brown could perhaps be most remembered for reviving Fiscal policy offer people the chance to post bellow the GOOD things about Mr. Brown and his service the country.
Now we must watch look to our new PM David Cameron, will he serve as a good PM? Can he hold together a coalition with the Lib Dems? What of Gorge Osborn I for one will go into this new era open minded, I hope for a brighter future of reform and stable real ecological economic growth.

Hung parliament keeping markets hanging

With the Torys on 306 seats, Labour on 258 and the Lib Dems on 57 we are presently in a state of hung parliment, before the election the Conservative warned of the effects on the economy but what has happened?
As we became closer and closer to a hung parilment the FTSE 100 fell more and more. The FTSE started on 12 April at just under 5800 but by the 4 may it had fallen to just over 5400. At the start of the 10th of may the FTSE was around 5125. This would imply that the hung parilment is hurting stocks but there are other factors, by 8:45am the FTSE had jumped to 5350, why? A euro stablizing fund has raised the FTSE but over all it is on the fall.