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October 22, 2012

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Anonymous

Spot on!

Zorblog

"Mr Halligan wants the government to do something about the (possible) failure in bond markets - cut spending. But he - and more significantly those who think like him - seem relaxed about the failures in goods and labour markets that cause at least 2.5 million people to be out of work."

This is indeed a fine example of inconsistency, ideological bias and intellectual dishonesty.
And once again, this is denounced by Chris not on the merits of economics or (opposed) ideology, but on the merits of pure logic.

john problem

2,5 million people out of work is a loss of £8000 on average to the treasury in income tax and NHI. Then benefits must be paid to them at the rate of £10,000 on average. My calculator cannot cope with the calculation as to how much 2.5 million people out of work will cost the country. Why do our leaders not understand the prime formula: jobs pay wages, wages pay taxes, taxes pay government bills. Beats me.

Keith

May be Mr Halligan is suffering from hysteria?

The Imaginary bond vigilantes are just around the corner.

Neil

ITYF the unemployment thing is a feature in this system, not a bug.

Simon Reynolds

Good, thoughtful post from Chris as usual.

According to the nice summary of UK public spending at the Institute for Fiscal Studies:

http://www.ifs.org.uk/ff/lr_spending.xls

public sector gross debt interest payments over the 64 years from 1948-49 to 2011-12 averaged almost exactly 4.0% of GDP per year, while over the same period public sector net debt interest payments averaged almost exactly 3.0% of GDP per year.

Halligan gets into a lather, saying that by 2016/17 debt interest costs, "are set to soar by a staggering 107pc to £64bn a year – and that’s on benign interest rate assumptions, assuming credit markets don’t revolt."

Liam is like David Cameron -- someone who is staggered by large numbers. What Halligan doesn't say is that with a likely nominal GDP of around £1940 billion in 2016-17, the gross debt interest will be around 3.3% of GDP -- well below the long term post war average. Net interest will be even lower. Liam needs to relax -- the public finances are not the UK's biggest economic problem. Unemployment is.

Halligan admits: "This column has been warning about Britain’s impending budgetary ruin, and the danger of gilt market meltdown, for many years, not least during the middle and late 2000s..."

Er, well where is the gilt market meltdown?

Anyway, why should we care what the sovereign bond markets think? I'm with Ralph Musgrave on this one.

James James

Actually, the monied class interest is in supporting govt bonds: a nice risk-free return on their money.

The existence of the govt bond market is govt failure. There's no inconsistency in a free marketeer wanting to eliminate government-created rents.

Ed Rector

What do you expect to read from the chief economist of Prosperity Capital Company??

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