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July 20, 2016

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Hilary Richards

Labour's economic credibility would have been greatly helped by them running an accurate critique of Osborne's policies in the period 2010-2015. To my mind it was their job to do so but they failed to do it. I think this is what Paul Krugman meant when he called the UK left 'spineless'.

M

Corbyn suffers from a massive negative halo effect partly due to his perceived lack of leadership qualities, but also partly due to his childish 'Wolfie Smith' schtick. I know it plays well with a certain kind of gauche loony lefty minority (who are either true believers from the first time round or are too young to see recognize history repeating itself as farce), but getting chummy with violently anti-Semitic groups like Hamas and Hezbollah and hanging out with crusty old race mongers like Livingstone doesn't project tags like 'serious', 'statesmanlike' or 'gravitas'. His initial attempts to forge a new serious politics fell into the classic traps Trots of his era always fall in to, they just cannot seem to break free of cultish behaviour and the wider public pick up on this. Politicians may not be like the rest of us, but they have to try and present a balance between showing gravitas and pretending to be like the rest of us. Corby got to where he is by offering up something different, unfortunately that something different quickly turned into acting like a seventies comedy character/sixth form student politician.

Churm Rincewind

"If people don’t know basic economics, why should we assume that they are good judges of economic policy?"

Indeed. By the same token, if people don't know basic jurisprudence, or the basic workings of Nato/pensions/the arts/healthcare/local government/international trade/the EU/transport policy/the media/you name it, why should we assume that they are good judges of policy in any of these areas?

Which kind of leads to the conclusion that effective policy making would be enhanced by disenfranchising the inconvenient multitude.

From Arse To Elbow

One long-standing example of the halo effect is the assumption that as Tory ministers are generally richer than their Labour counterparts, they must be clever with money.

This points to a truth: most people imagine "running the economy" is a matter of monetary and fiscal policy alone. Despite the right-wing focus on supply-side reform, and the leftwing focus on productive capacity, the chief concerns are prices (of goods and shares) and rates (of tax and exchange).

aragon

Perhaps we should teach the rule of 72 at school?

John MacDonald wanted to vote for Osborne's fiscal charter. (The household budget fallacy).

There may be some Keynesian stimulus, but not a fundamental understanding.

They could be more specific in challenging the Tory narrative of success etc.

But fundamentally it's the mummy problem.
http://westwing.wikia.com/wiki/The_Mommy_Problem

"Josh explains to Bram on the phone and the assembled staff in headquarters about the "mommy problem." He says: "When voters want a national daddy, someone tough and strong, they vote Republican. When they want a mommy to give them jobs, health care policy equivalent of matzo-ball soup, they vote Democratic.""

West Wing - Season 7 Episode 2.

Igor Belanov

The combined forces of economists and the UK's financial and business elites didn't swing enough voters in the referendum campaign. Maybe 'economic credibility' has become an insult at last and the Tories are finally getting their comeuppance.

Donald

It's definitely the tory brand plus people not knowing they've been rubbish since 2010. To my shame I argue with people about this stuff on a climbing website and there's loads of intelligent and relatively informed people who just know the tories are good at the economics and nothing will persuade theme otherwise.

Dave Hansell

"Which kind of leads to the conclusion that effective policy making would be enhanced by disenfranchising the inconvenient multitude."

Alternatively, those who believe they are entitled to their own facts could always try engaging with the subject rather than blindy following a wishful thinking approach. It's not exactly quantum mechanics. Lots of other ordinary people manage it.

An Alien Visitor

I would link this to the global warming issue.

What has been the steps taken by the advanced nations to tackle climate change?

Answer: Absolutely nothing, zilch, nada.

Given the impending threat you would think some form of a cultural shift would have taken place by now but no. People are consumption junkies and absolutely nothing has changed culturally.

The fact the Tories are habitually trusted more on the economy of obviously a form of brainwashing but even brainwashing must have some link to reality. You can't make someone jump of a bridge simply through brain washing alone. So while brainwashing is important the brainwashing message must link to the culture at some level.

And that culture is rotten to the core.

aragon

I have been reflecting on your basic economics as represented by the University of Nottingham study.

I would compare it to gambling and odds, at for example the roulette table. It with statistics to reveal the extent to which the house gains such an advantage from having a zero (and double zero) on the wheel.

It is unreasonable to expect non-specialist (in statistics) to identify the consequences in such complex products (where zero is only a small proportion of the numbers on the wheel - and roulette is one of the fairer products).

For example compound interest is ill-conditioned and complex to calculate. No you cannot simply use a computer (see numeric computing) as computers quickly get it wrong (floating point numbers)! (1+R)^N is deceptively simple.

Mortgages are not sold on the assumption that I won't pay the interest due except for Alternative Mortgage Products's (AMP), so compound interest is irrelevant unless I fail to make the payments (when the consequences are catastrophic).

But if I have a adjustable rate or fixed rate repayment mortgage (even interest only) I don't pay compound interest, but simple interest.
i.e. The amount of interest (at a variable or fixed rate) due on the principle each year (or the equivalent monthly payment).

People get to occupy the house or charge rent as a dividend to offset the interest charges / maintenance costs etc.

The house is an asset that inflates in price at seven percent (8.1% in April) compounded. (general inflation below 2% and near zero/deflation, mortgage rates of around 4%).

So paying an interest only mortgage my mortgage will remain static while the value of the house rises on average by 16,000 p.a. (at 19K not too far from the average wage - after tax)

http://www.bbc.co.uk/news/business-36833533

With a repayment mortgage I am paying the interest and a portion of the principle, so in effect the interest payment falls with time (inflation adjusted) as the principle shrinks.

At current rates 72/(8.1-4%), it is less than eighteen years (of a typical 25 year term) for my house to double in value, while my principle remains static (inflation adjusted) as I pay the interest only.

Of course this is a national average and is much greater for the South East. No wonder people in the South East see housing as a cash machine, and are obsessed with house prices, and willing to sell their souls for the ponzi/state provided return on investment.

With an endowment mortgage I am been mis-sold. I am looking for the compound growth of my investments to match the compound interest on my mortgage (seems simple but no guarantees of matching growth rates).

But compound growth is very sensitive to small changes in interest/rate or rate of return, any mismatch has large consequences in terms of a surplus/shortfall, but this is not highlighted by the vendor.

The whole basis of mis-selling is that only a specialist understands the complexity and risks of the product, so the regulator moves the risk to the vendor, where it should have resided in the first place, as a matter of consumer protection.

This matches the conclusions of the Nottingham study.

The housing inflation in the South East is maintained with new entrants (Ponzi scheme - low rates, high principle amounts (higher multiples), financial innovation (longer repayment terms) or other financial innovation (AMP) by the Banks (and at the top end - hot money) but also direct Government subsidies of seven billion per year, with low interest rates.

Other Bank/Government spending including infrastructure keeps the London economy buoyant.

The market is rigged in favour of the home owner in the London, to the tune of approximately doubling their annual salary. No wonder they vote their house prices.

This is just a quick and dirty first pass/opinion :)

Anthony

I have a more simple explanation.

Corbyn et al supported and praised the economics of Chavez.

They are now queuing for bread and dying from lack of pharmaceuticals.

I expect no better levels of competence from McDonnell and Corbyn.

Nanikore

Labour just does not look like a professional outfit. It looks like a shambles. It has done for a quite a while, and it has got worse. But this will not be easy for Labour to handle, as New Labour got a bad reputation for over-management with respect to PR - it became synonymous with Spin. They have a problem in presenting themselves as serious - they don't look like people who you want to have handle the nation's purses.

chris

@ Anthony - It's not that simple. For one thing, I'm not sure how many voters know what Corbyn thinks of Venezuela, or how bad things are there: people pay much less attention to politics than you think.
And for another, many voters support price and rent controls:
https://yougov.co.uk/news/2014/05/04/majority-support-rent-controls/
http://classonline.org.uk/docs/Class-YouGov_poll_results_28_October_2013.pdf
The public are as opposed to free markets as they are to intelligent leftism.

BCFG

Anthony raises an important issue, namely how stupid people like Anthony are!

To go from Corbyn admires Chavez to then go straight to people queuing for bread combines total ignorance with complete dishonesty. A total disregard for any sort of intellectual discussion. The likes of Anthony make such moronic comments because they assume the people on the receiving end of their stupidity are themselves stupid and ignorant.

Obviously because Thatcher admired Pinochet we should expect people to disappear, or because Clinton admired Yeltsin we should have expected TB to rise dramatically the USA!

The jury is out on whether people really are so stupid to take Anthony's comment seriously, but given the points made in this article maybe the Jury retired long ago!

Blissex

«the tory brand plus people not knowing they've been rubbish since 2010.»

No, they have been *fantastic* for most voters who matter, who are totally delighted that house prices have been pushed up relentlessly by the tory governments, as another commenter notes wisely:

«approximately doubling their annual salary. No wonder they vote their house prices.»

With a real doubling in price of property in the South East and London every 10 years, that has meant tax-free effort-free profits of over 100% on cash invested, and what makes it even sweeter for tory voters is that it is entirely redistributive, that is every increase in house price (in the south) makes someone poorer (usually in the north) even worse off.

But tax-free effort-free over 100% profit rates for over 30 years guarantee that «vote their house prices» is the obvious policy for southern property speculators.

Blissex

«the tory brand plus people not knowing they've been rubbish since 2010.»

Plus it is not just merely southern property prices; the tories have worked even harder than New Labour did to bring down middle and low wages and make low and middle wage workers job more insecure and miserable, whether through "non-racist" immigration or whatever else.

The enormous increase of workers on "zero-hour" contracts show just how huge is the oversupply of labour in the UK: being on permanent on-call at the sole discretion of employers and without payment is something that very few people would accept unless desperate to have any small chance at getting some wage against a flood of oversupply. As J Robinson once said, the only things worse than working in a sweatshop is not working even in a sweatshop.

BTW for people who haven't figured this out: "zero-hour" contracts don't actually save that much to employers, their main value is in making "team members" feel powerless and desperate, and thus docile.

Churm Rincewind

Dave Hansell: You say "those who believe they are entitled to their own facts could always try engaging with the subject rather than blindly following a wishful thinking approach. It's not exactly quantum mechanics. Lots of other ordinary people manage it."

Surely CD's point is that they don't?

Blissex

«approximately doubling their annual salary. No wonder they vote their house prices.»

As to that very interesting map of house prices and their changes in 2005 and 2015 by region:

http://loveincstatic.blob.core.windows.net/lovemoney/House_prices_real_terms_lovemoney.jpg

And the table with absolute value here:

http://www.lovemoney.com/news/53528/property-house-price-value-real-terms-2005-2015-uk-regions

It is pretty amazing, and must have an interesting effect on "politics" :-); it is also amazing that

* lots of businesses are not relocating to areas where housing is much cheaper than in the South East and London;
* the government has decided to push for a relatively high uniform national minimum wage that reduces the saving of moving to areas where housing is much cheaper;
* the government is spending lots of money on house price support and infrastructure building in the South East and London.

Blissex

«the government is spending lots of money on house price support and infrastructure building in the South East and London»

Plus with HS1/HS2 they seem to badly want to greatly extend the feasible commuting radius to jobs in London.

Redwood Rhiadra

“Suppose you owe £100,000 on a mortgage at an Annual Percentage Rate of 5%. If you didn’t make any payments on this mortgage how much would you owe in total after five years?”

Depends on how much the house sold for at the foreclosure auction...

Theophrastus

Ordinary people are not stupid. It's not cognitive biases that put them off socialism, but the failures of socialism itself. The vast majority of working class voters approve of the current 'system' while wanting it to work a little more in their interests in certain respects.

joe

I find it more peculiar that ICM, YouGov etc keep asking stupid questions. Ask a question that 80+% will have some knowledge about then fine. But the ICM question is not and cannot be answered by a thoughtful, considered response but simply a kneejerk response to do you like or not like Corbyn? Whatever the question the answer will be based on like/ dislike of personalities or groups. Trump does not bother with policies, he tells the folks what they want to hear. The folks do not hear nor want to hear any counter arguments now as they are no longer listening. Same as in the "Project Fear" get-out clause in our Referendum completely blocked out any normal voter or the mass media from considering the counter evidence. If you have watched any basic quiz show in UK you will realise how thick, uneducated and stupid 90% of the UK public now are. There is absolutely no point in politicians putting reasoned arguments to them. National governments do not run countries, nor economies either. Multi-national banks and businesses do and to a lesser extent national ones. Major foreign investors also do, but all governments can do is tinker at the edges. The last lot did not even have a basic forward strategy according to Theresa May.

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