2013-05-26T02:29:38-04:00 Ramesh Patel http://www.huffingtonpost.co.uk/author/index.php?author=ramesh-patel Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Ramesh Patel Good old fashioned elbow grease. tag:www.huffingtonpost.com,2012:/theblog//3.2007552 2012-10-24T01:33:10-04:00 2012-12-23T05:12:01-05:00

Ramesh Patel http://www.huffingtonpost.com/ramesh-patel/ - Winston Churchill

As a Conservative I have no pleasure in exposing David Cameron's deficit claims. However, as long as the party continues to talk down the economy via the blame game, confidence will not be given an opportunity to return. For it is an undeniable and inescapable economic fact: without confidence and certainty there can be no real growth.

Below are the three deficit claims - the mess. The evidence comes from the IMF, OECD, OBR, HM Treasury, ONS and even George Osborne. The claims put into context are:

CLAIM 1
The last government left the biggest debt in the developed world.

After continuously stating the UK had the biggest debt in the world George Osborne admits to the Treasury Select Committee that he did not know the UK had the lowest debt in the G7? Watch: Also, confirmed by the OECD Those who use cash terms (instead of percentages) do so to scare, mislead and give half the story.

Its common sense, in cash terms a millionaire's debt would be greater than most people. Therefore, the UK would have a higher debt and deficit than most countries because, we are the sixth largest economy. Hence, its laughable to compare UK's debt and deficit with Tuvalu's who only have a GDP/Income of £24 million whilst, the UK's income is £1.7 Trillion.

Finally, Labour in 1997 inherited a debt of 42% of GDP. By the start of the global banking crises 2008 the debt had fallen to 35% - a near 22% reduction page 6 ONS Surprisingly, a debt of 42% was not seen as a major problem and yet at 35% the sky was falling down?

CLAIM 2
Labour created the biggest deficit in the developed world by overspending.

Firstly, the much banded about 2010 deficit of over 11% is false. This is the PSNB (total borrowings) and not the actual budget deficit which was -7.7% - OBR Economic and Fiscal Outlook March 2012 page 19 table 1.2

Secondly, in 1997 Labour inherited a deficit of 3.9% of GDP (not a balanced budget ) and by 2008 it had fallen to 2.1% - a reduction of a near 50% - Impressive! Hence, it's implausible and ludicrous to claim there was overspending. The deficit was then exacerbated by the global banking crises after 2008. See HM Treasury. Note, the 1994 deficit of near 8% haaaaaah!

Thirdly, the IMF have also concluded the same. They reveal the UK experienced an increase in the deficit as result of a large loss in output/GDP caused by the global banking crisis and not even as result of the bank bailouts, fiscal stimulus and bringing forward of capital spending. It's basic economics: when output falls the deficit increases.

Finally, the large loss in output occurred because the UK like the US have the biggest financial centres and as this was a global banking crises we suffered the most. Hence, the UK had the 2nd highest deficit in the G7 (Not The World) after the US and not as a result of overspending prior to and after 2008- as the IMF concur.

CLAIM 3
Our borrowing costs are low because the markets have confidence in George Osborne's austerity plan and without it the UK will end up like Greece.

Yes, the markets have confidence in our austerity plan and that's why PIMCO the worlds largest bond holder have been warning against buying UK debt.

The real reason why our borrowing costs have fallen and remained low since 2008 is because, savings have increased. As a result, the demand and price for bonds have increased and as there is inverse relationship between the price of bonds and its yield (interest rate) the rates have fallen. Also, the markets expect the economy to remain stagnate. Which means the price for bonds will remain high and hence, our borrowing costs will also remain low.

Secondly, the UK is considered a safe heaven because, investors are reassured the Bank of England will buy up bonds in an event of any sell off - which increases the price of bonds and reduces the effective rate. Note, how rates fell across the EU recently when the ECB announced its bond buying program. Thirdly, because, we are not in the Euro we can devalue our currency to increase exports. Moreover, UK bonds are attractive because, we haven't defaulted on its debt for over 300 years.

David Cameron would like people to believe the markets lend in the same way as retail banks lend to you and I.

Overall, when the facts and figures are put into context these juvenile deficit narratives and sound bites ("mere words and no evidence") simply fail to stand up to the actual facts. The deficit myth is the grosses lie ever enforced upon the people and it has been sold by exploiting people's economic illiteracy.

So, David Cameron when are you going to apologise?

Cameron is playing the blame game to depress confidence and growth to justify austerity. Secondly, to use austerity as justification for a smaller state to gain lower taxes. Thirdly, to paint Labour as a party that can not be trusted with the country's finances again. Therefore, we Conservatives will win a second term because, people vote out of fear. The latter strategy worked the last time in office (18 years) and will work again because, in the end, elections are won and lost on economic credibility. Hence, as people believe Labour created the mess they won't be trusted again.

Finally, as the truth is the greatest enemy of the a lie I urge you to share this on Facebook, Twitter, blogs, text and email etc etc. So the truth can be discovered by all. Finally, have no doubt, people have been mislead by the use of the following strategy:

"If you tell a lie big enough and keep repeating it, people will eventually come to believe it" Joseph Goebbels]]> tag:www.huffingtonpost.com,2012:/theblog//3.1946127 2012-10-07T08:46:27-04:00 2012-12-07T05:12:02-05:00

Ramesh Patel http://www.huffingtonpost.com/ramesh-patel/
Its quite hilarious how George Osborne passes off proverbs and idioms as economic fact. What is more surprising is his use of childish tricks to mislead the country. Now either George Osborne really thinks idioms and proverbs is the basis of economic theory and fact or he is pulling a fast one to justify policies. Common sense tells us all it's the latter.

Below I reveal how these proverbs and tricks are used to fool people by exposing
the 5 claims made about austerity. They are:

Claim 1 - The IMF approves of George Osborne's austerity plan because they said it was ambitious.

Since when has ambitious meant approval? Someone please notify the Oxford dictionary. When the IMF said that Osborne's deficit reduction plan was ambitious they meant its was difficult and most likely unachievable- because it will chock off growth & increase the debt & deficit. Hence, the IMF advised him in 2010 to follow a 8 to 10 year deficit reduction plan.

Claim 2 - George Osborne claims that we must eliminate our spending in 5 yrs because: "every house wife knows you tighten your belt when your household income falls"

Firstly, a house wife who has a reduction in her household budget does not decide to clear her mortgage in 5 years - does she?

Secondly, there is difference between a household reducing its spending and the state reducing its spending when the economy is in recession. When a household reduces its spending it increases the amount of money it holds. Where as a government that attempts to reduce its spending during a recession engages in a self defeating activity. Rather than increasing its income it increases its deficit and debt. Quite simply, cutting spending results in increased unemployment which increases its benefit spending. As a consequence, consumption spending is reduced which, results in lower income or GDP. Austerity has never worked.

Overall, a household budget is not run like a country's budget. For instant can you imagine a house wife saying : " Honey! I'm just popping out to buy a nuclear war head and see about hiring more nurses!

Claim 3 - Our borrowing cost are lower because, the markets approve of our austerity plan.

Yes, the markets have confidence in our austerity plan and that's why PIMCO the worlds largest bond holder have been warning against buying British government debt.

The real reason why our borrowing costs have fallen and remained low since 2008 is because, the demand for bonds have risen and there is a an expectation that they will remain high because the markets expect the UK economy will remain stagnate. In a nutshell, consumers and businesses are not spending. As result, saving levels have risen which, has increased the demand for bonds and increased their price. There is a inverse relationship between the price of bonds and its yield- return or interest rates.

Hence, if a £1000 20 year bond is at an interest rate of 5% you would receive a return of £50 per annum. Now suppose the demand for bonds rise because, more people are saving. Lets assume it rises from £1,000 to £1,500. With the interest rate remaining the same, the return will also remain the same at £50. Hence, the new effective interest rate falls because £50 / £1,500 = 3.33%.

Secondly, the markets have confidence in the UK because, we are not in the Euro and we can devalue our currency to increase exports. Further more, the markets are assured that the Bank of England have the option of printing money to buy up bonds in an event of any sell off - which increases the demand for bonds and reduces its price. Moreover, UK bonds are attractive because, we have not defaulted on its debt for over 300 yrs.

Someone tell George Osborne the bond markets do not lend in the same way retail banks do.

Claim 4 - We are currently paying out 1 in 4

It's a vague statement that implies we are paying 25% of the country's income/GDP in interest payments. When in actual fact we are paying out 3.03% of GDP. When Labour took office in 1997 interest payments accounted for 4.23% of GDP and by 2010 interest payments were down by 50% to only 2.08%. Since then payments have risen to 3.03% See UK Public Spending Chart http://bit.ly/TgkhzX

Talk about scare mongering and talking down the economy. No shame!

Claim 5 - So you want to spend more to reduce the deficit? Also: "You can not reduce the deficit by spending more"

This proverb is asked as if it's a strict rule of economics- it's not. In fact it does not even hold true. It may be good advice but, it does not translate to economic reality, theory or fact for individuals, businesses and government.

Moreover, it goes against the whole ethos of capitalism because, it implies that you should not try to better your lot, get a higher paid job, increase profits, build roads and airports if it means acquiring more debt -no matter how great the rewards. Hence, you should not "speculate to cumulate" if you acquire more debt. Now, we all know this is not how the real world works. Hence, as economics is concerned with the real world and not the fictional world of idioms and proverbs, it make this a galactically stupid and misleading question and statement. The fact is everyday we all take "calculated risks" in all sorts of ways and we all know you can speculate to cumulate.

Overall, all five claims show that Cameron and Osborne surely knows how to pull the wool over people's eyes. Moreover, it reveals they have very little regard and contempt for ordinary folk and their intelligence. We have right to the truth and we expect our politicians to be honest. This is why I urge you to share the truth with everyone via Facebook, Twitter, Google +, email and text etc etc etc.

Finally, as George Osborne prefers proverbs and idioms over economics, I thought he may like the following relating to austerity:

More haste, less speed and Honesty is the best policy.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1920913 2012-09-27T17:15:31-04:00 2012-11-27T05:12:01-05:00

Ramesh Patel http://www.huffingtonpost.com/ramesh-patel/
I tell you in all candor, when it becomes acceptable and the norm to do or say things to deliberately hurt the countries economy and it is no longer considered an act of treachery against the state, then we should all fear for future of our children and the next generation.

As an economist, an advocate of free market economics, a Conservative and a patriot I have been shocked and appalled by the unpatriotic and treacherous strategy pursued by this Conservative Party.

Instead of acting patriotically by standing up for the countries economy and expressing confidence in it, they have acted treacherously against the countries best interest via falsely knocking down the economy (the blame game) in a calculated manner on every media occasion since 2008. They have done this by gross misinformation and exaggeration of the real state of the economy prior to 2010 - even to The City and at Davos to international bankers.

We elect our MP's expecting them to act in our best interest, the economy and our country. We do not expect them to act like traitors and do things deliberately to harm and hurt the countries economy and the people.

Ignorance is no excuse as all politicians the world over know that talking down the economy is a sure fire way to crush consumer and business confidence to cause a serious slump and hurt the country and its people. Hence, they always do the patriotic thing by standing up for their economies by expressing confidence, down playing any economic concerns and at best put things in context to calm people, business and the markets. Even past Conservative leaders like Baroness Thatcher and John Major were not ignorant of this economic fact. It's funny then, that George Osborne showed no such ignorance when he recently said: "We should all choose our words carefully when we're talking about the Greek economy"

By telling people the UK faces an economic tsunami, we have the biggest debt and deficit in the world and we'll end up like Greece, has created climate of fear, the expectancy of a severe recession, wage cuts and loss of jobs. As a result of these messages, consumers have reduced their spending. Consequently, businesses have been hit hard at the tills. As result, they have halted their investments and laid of workers- leading to what Keynes calls a Paradox of Thrift. Where by we all reduce our spending at the same time resulting in a deep slump and further exacerbation of the deficit and debt. Economic history shows that austerity at a time of recession has never worked and it always shrinks the economy via job losses, which means less people spending which, results in further job losses and even less spending. This cause and effect of job losses leads to a downward spiral of the economy - hence it is self defeating. Ask yourself this question:

Have you ever heard of a unemployed man paying of his debt?

The transparency of this strategy becomes obvious when we consider how the Cameron conveniently forgets Norman Lamont successful strategy in the early 1990's recession. He quite rightly said: to give the economy the opportunity to recover he would not start cutting straight away. In other words, the right time for austerity is after the recovery. Note also Norman Lamont at the time faced a record deficit of 8% which was higher than that of 2010 of 7.6%. Even more surprisingly, his special adviser at the time was yours truly David Cameron.

Even though other economic commentators have spoken about the ulterior motive of Cameron's strategy, he is lucky that the man on the street can't see how talking down the economy is unpatriotic and act of treachery against the country because it destroys confidence and creates fear and uncertainty which results in a down turn.

If they could it would mark the end of the Conservative Party. For who in their right mind would support a unpatriotic party and a party of traitors. As a Conservative I hope it does not become apparent.

I tell you in all candor this blame game is designed deliberately to prolong and deepen the recession to justify austerity. Hence, providing the justification for a smaller state and future lower taxes. Laudable policy objectives if argued for honestly and positively- not sold via fear and threat of avoiding a false Greek tragedy.

Mark my words, as 2015 looms near the frequency of the blame game will increase. Which means they will talk us all into a self fulfilling prophecy of a real Greek tragedy, the destruction of our economy and the destruction of millions of lives. The question we need to ask is: Is tribal loyalty worth the sacrifice of ruining the life chances of countries children and the next generation via a third and final dip in the economy leading us all in to a Greek scenario?

The Conservative Party have to be careful as it could lead to the country labelling us as traitors for deliberately talking down the economy. If they do, it will be the end of our party for a few generations.

The only way to stop the Coalition talking us into Greek disaster. That is to do the patriotic thing and that is: expose this underhanded strategy. Which, will have the effect of Coalition MPs considering their seats in the next election. Now everyone knows that nothing concentrates the mind more than the loss of ones job. So I urge you now to share this via text, Twitter and Facebook etc etc.

In Part 2 I completely expose once and for all three 3 claims made via the blame game and including video evidence exposing the deficit debt lies.

Finally, take note of Douglas MacArthur who warns against politicians use the veil of a national crises. He said:

"Our government has kept us in a perpetual state of fear and uncertainty - kept us in a continuous stampede of patriotic fervor - with the cry of national crises"]]>