How do you think the UK economy will perform over the next 5 years ?

[mc2fool]

However you define it? Well, how do you define it and, more importantly, which quantitative measure do you propose should be used to know if your prediction that the economy will grow will come true or not. You've already pooh-poohed GDP/GNP/GNI, so which instead?

That is really a question for the OP since he introduced the idea of the UK economy growing or not, so presumably he had a definition in mind. For the purpose of this topic I assumed he meant the headline rate of growth that is often reported in the media. In any event I am happy to go with his presumed definition for this discussion only, and I am not sure his investigation will be helped by a detailed and arcane discussion about other definitions.

No, it was a question to you. Given that a large number of your posts in this thread have been decrying what you previously referred to as "traditional" measures of the economy, you have clearly not accepted that for the purposes of the discussion in this topic it meant the headline rate of growth that is often reported in the media. The media reports what the ONS uses, and that is GDP.

[Lootman]

That is really a question for the OP since he introduced the idea of the UK economy growing or not, so presumably he had a definition in mind. For the purpose of this topic I assumed he meant the headline rate of growth that is often reported in the media. In any event I am happy to go with his presumed definition for this discussion only, and I am not sure his investigation will be helped by a detailed and arcane discussion about other definitions.

No, it was a question to you. Given that a large number of your posts in this thread have been decrying what you previously referred to as "traditional" measures of the economy, you have clearly not accepted that for the purposes of the discussion in this topic it meant the headline rate of growth that is often reported in the media.

I can accept something for the purpose of a particular discussion without necessarily agreeing that it is the best definition. I see that as a mark of respect to the OP, who clearly felt the term did not need further definition or analysis. And 46 other Lemons voted on the topic without feeling the need to ask about definitions first.

[Urbandreamer]

The report you quote was written in July 2022 when gas prices were about 5x what they are now. I would have thought the most relevant price would be the cost of renewable electricity when the wind doesn’t blow and backup gas generation is banned.

So, gas is still more expensive then, by your argument.
I think that I'll ignore the comment about the banning of gas generation though, other than to comment that you wrote it.

[mc2fool]

No, it was a question to you. Given that a large number of your posts in this thread have been decrying what you previously referred to as "traditional" measures of the economy, you have clearly not accepted that for the purposes of the discussion in this topic it meant the headline rate of growth that is often reported in the media.

I can accept something for the purpose of a particular discussion without necessarily agreeing that it is the best definition. I see that as a mark of respect to the OP, who clearly felt the term did not need further definition or analysis. And 46 other Lemons voted on the topic without feeling the need to ask about definitions first.

Indeed, you were the only one to decry the normally accepted measure.

[Lootman]

I can accept something for the purpose of a particular discussion without necessarily agreeing that it is the best definition. I see that as a mark of respect to the OP, who clearly felt the term did not need further definition or analysis. And 46 other Lemons voted on the topic without feeling the need to ask about definitions first.

Indeed, you were the only one to decry the normally accepted measure.

I did not introduce that topic. Someone else offered a definition and so naturally I pointed out some flaws with it. But the diversion into such elaboration was probably on balance not helpful to the OP, unless he wants to tell us differently.

If you wish for a discussion about different definitions of economic growth I suggest you start a new topic for that. I feel sure it will be the highlight of the week here.

[Ashfordian]

It will be at best static, funded by more government debt. At the end of 5 years, debt and debt costs will have increased further compared to today.

We are now in a debt death spiral. I'm not sure when or how this ends but it will not be pleasant when it does. However I don't see it ending in the next 5 years.

[Nimrod103]

The report you quote was written in July 2022 when gas prices were about 5x what they are now. I would have thought the most relevant price would be the cost of renewable electricity when the wind doesn’t blow and backup gas generation is banned.

So, gas is still more expensive then, by your argument.
I think that I'll ignore the comment about the banning of gas generation though, other than to comment that you wrote it.

As I pointed out, gas generated electricity is likely to be by far the cheapest for the foreseeable future, for those periods when the wind doesn’t blow. The price of wind generated electricity has yet to be properly established by the bidding process, and the actual construction of wind power stations by the winning bidders. Also I will agree that going forward gas prices are likely to be volatile because we don’t store enough in this country.
But I don’t think it changes the fact that the days of cheap energy are over, and that will reverberate through the entire economy.

[Urbandreamer]

My concern for the immediate future (next five years) of the UK economy is the current national debt and it's interest payments.
I honestly don't see any change in government improving that situation.

Apparently debt is equal to GDP.
https://www.ons.gov.uk/economy/governme ... es/may2023

That document only covers the last three years, but the situation is far from good.
It can take decades to reverse such a situation and the medicine isn't nice. Forget hand outs because the price of gas has gone up, we are talking not building or fixing schools.
We likely would be talking pay freezes (while the cost of living rises) and job losses in the NHS, were we to try and rectify the imbalance.

Alternatively we could inflate away the bulk of the debt, though the only new debt that we could then get to finance current spending would be index linked.
A brief web search will show the recent increase in the money supply and in the ratio of index linked gilt sales to standard gilt sales. How well this policy would work over the long term is debatable.

Would you believe that if we added the costs of defense (Armed forces) to the costs of public order and safety (police) it would be less than we pay in interest upon our debt?
https://www.statista.com/statistics/298 ... in-the-uk/

[mc2fool]

Indeed, you were the only one to decry the normally accepted measure.

I did not introduce that topic. Someone else offered a definition and so naturally I pointed out some flaws with it. But the diversion into such elaboration was probably on balance not helpful to the OP, unless he wants to tell us differently.

Actually you did, by challenging the standard accepted measure which nobody else batted an eyelid at. Had you not that topic wouldn't have been discussed at all, but glad that you now accept that wasn't helpful.

If you wish for a discussion about different definitions of economic growth I suggest you start a new topic for that.

No need, I'm happy with the standard accepted measure.

[Edit: fixup quotes]

[Urbandreamer]

If you wish for a discussion about different definitions of economic growth I suggest you start a new topic for that.

No need, I'm happy with the standard accepted measure.

To be fair, different measures are useful for different things. I actually prefer GNP for my view of the economy. However GDP is far more useful when considering tax and government actions.

I'd argue, that despite my preference, GDP is most appropriate to this thread. As, while not explicitly stated, the proximity of a general election and similarity of term of office and yardstick for the thread, makes the thread about government actions.

[mc2fool]

No need, I'm happy with the standard accepted measure.

To be fair, different measures are useful for different things. I actually prefer GNP for my view of the economy. However GDP is far more useful when considering tax and government actions.

I'd argue, that despite my preference, GDP is most appropriate to this thread. As, while not explicitly stated, the proximity of a general election and similarity of term of office and yardstick for the thread, makes the thread about government actions.

Indeed, but if you remember (it was a long time ago, posts-wise!) the whole decrying of the traditional metrics came about in response to stats showing that there was no notable historical difference between the main parties, economic growth wise, by those metrics and, further, between more lefty/righty countries. Had those measures shown a decisive "win" for the right I'm sure GDP/GNP would have been embraced whole heartedly.

[Lootman]

I did not introduce that topic. Someone else offered a definition and so naturally I pointed out some flaws with it. But the diversion into such elaboration was probably on balance not helpful to the OP, unless he wants to tell us differently.

Actually you did, by challenging the standard accepted measure which nobody else batted an eyelid at.

Neither of us can know who batted eyelids at what, but I am glad you now accept the pointlessness of endlessly pursuing this.

[csearle]

Moderator Message:
The topic is How do you think the UK economy will perform over the next 5 years? Please could we stick with this. I realise the benchmark will affect the answer, but I think that shouldn't be the emphasis of this thread. Thanks - Chris

[Lootman]

My concern for the immediate future (next five years) of the UK economy is the current national debt and it's interest payments. I honestly don't see any change in government improving that situation.

Apparently debt is equal to GDP.
https://www.ons.gov.uk/economy/governme ... es/may2023

That document only covers the last three years, but the situation is far from good. It can take decades to reverse such a situation and the medicine isn't nice. Forget hand outs because the price of gas has gone up, we are talking not building or fixing schools. We likely would be talking pay freezes (while the cost of living rises) and job losses in the NHS, were we to try and rectify the imbalance.

Perhaps what we really need is for a government to be honest, admit all this and that it cannot do much other than tinker about and try and manage the decline. And stop promising grand sweeping visions of transformation that we cannot afford.

It would be like a blast of fresh air.

That said I suspect that we can muddle through a good few years yet, and make some money along the way, before the whole house of cards collapses in on itself. The only questions are which shoe will drop first and who will end up carrying the bag?

[servodude]

My concern for the immediate future (next five years) of the UK economy is the current national debt and it's interest payments. I honestly don't see any change in government improving that situation.

Apparently debt is equal to GDP.
https://www.ons.gov.uk/economy/governme ... es/may2023

That document only covers the last three years, but the situation is far from good. It can take decades to reverse such a situation and the medicine isn't nice. Forget hand outs because the price of gas has gone up, we are talking not building or fixing schools. We likely would be talking pay freezes (while the cost of living rises) and job losses in the NHS, were we to try and rectify the imbalance.

Perhaps what we really need is for a government to be honest, admit all this and that it cannot do much other than tinker about and try and manage the decline. And stop promising grand sweeping visions of transformation that we cannot afford.

I think your next government will

if the answer then is "austerity" again... then hey you've got another passport

[Jam2Day]

As for the "education" system, well it's not. It's a training system.


https://www.gov.uk/government/speeches/ ... -education

Fair enough, but don't then expect that a state education will waste time teaching thinking or questioning.

Now with that, I agree. Sadly these days if you ask someone a question they will provide a link rather than an analysis. Then if you ask them to explain what that link means, they produce another link. The art of understanding has been replaced with the art of looking something up and hoping that it flies.

Yep. A few years ago I attended a dinner/fundraising charity event which was also sponsored by the local Lloyds Bank. A general knowledge quiz competition was the main event. Interestingly, every time a question was asked, without fail, the bright young things on the Lloyds table were to be seen tapping their apps for all their worth. Surely not the done thing. In the old days, this would have been regarded as below the belt. The funny thing was that when they announced the results, a table of old retired fuds were the winners. The bright young things came second. Who said technology pays .

[vand]

Debt/GDP and a country's ability to meet its future obligations is a concern, but it is too for every single other developed economy, so we are no different in that regard, and indeed probably a little better off than a few noticeable others that are likely to be the first in line to get beaten up.

Japan may be the one to watch here - Debt/GDP way higher anyone else AND a now rapidly collapsing demographic base means their financial ruin is all but guaranteed.

[NeilW]

Debt/GDP and a country's ability to meet its future obligations is a concern,

How is it a concern?

Every Gilt is simply swapped for a Sterling bank deposit via the operation s12(4) of the National Loans Act 1968 and the usual Exchequer and Audit Department Act payment process for the Consolidated Fund.

Same process in Japan.

Sovereigns with their own money that free floats can't default. In the UK it is quite literally illegal to do so. Even if HM Treasury flat out refused to pay, anybody with a Gilt could force them to make the transfer by court order, thanks to the above legislation.

Somebody asked how to make money out of understanding this. Simple. Sell sovereign credit default swaps to those who are hard of accounting and still believe sovereigns can default. Unfortunately to do that you need to be a big bank - funny that.

People *spending* money rather than saving it causes a boom, not a bust. The opposite is also true. An excess of saving, which is what this mythical 'debt' actually is, tends to cause a reduction in activity.

[Urbandreamer]

Debt/GDP and a country's ability to meet its future obligations is a concern,

How is it a concern?

Every Gilt is simply swapped for a Sterling bank deposit via the operation s12(4) of the National Loans Act 1968 and the usual Exchequer and Audit Department Act payment process for the Consolidated Fund.

Same process in Japan.

Sovereigns with their own money that free floats can't default. In the UK it is quite literally illegal to do so. Even if HM Treasury flat out refused to pay, anybody with a Gilt could force them to make the transfer by court order, thanks to the above legislation.

Somebody asked how to make money out of understanding this. Simple. Sell sovereign credit default swaps to those who are hard of accounting and still believe sovereigns can default. Unfortunately to do that you need to be a big bank - funny that.

People *spending* money rather than saving it causes a boom, not a bust. The opposite is also true. An excess of saving, which is what this mythical 'debt' actually is, tends to cause a reduction in activity.

Indeed. This is certainly the case in some countries and was the case in the UK post WWII. It entails "currency controls" and "Financial repression".
The net result is that those with the ability find ways to move their capital elsewhere. It also leads to things like a black market in foreign smuggled goods, as your own currency can't be used to buy them to import at the "official" exchange rate.

https://www.intereconomics.eu/contents/ ... story.html

Financial repression may seem like a good idea if politicians have a hard time cutting spending or bringing structural reforms that would allow the economies to prosper again. This paper emphasises the danger of financial repression, arguing that financial repression undermines productivity growth. Analysing the post-war experience in industrialised countries as well as in lagging economies, or emerging markets, first, I find that financial repression is unlikely to lead to a stable period of debt liquidation. Second, the study suggests that engaging in potentially inflationary repression means levering measures and undermining the growth potential of the economy.

[vand]

Debt/GDP and a country's ability to meet its future obligations is a concern,

How is it a concern?

Every Gilt is simply swapped for a Sterling bank deposit via the operation s12(4) of the National Loans Act 1968 and the usual Exchequer and Audit Department Act payment process for the Consolidated Fund.

Same process in Japan.

Sovereigns with their own money that free floats can't default. In the UK it is quite literally illegal to do so. Even if HM Treasury flat out refused to pay, anybody with a Gilt could force them to make the transfer by court order, thanks to the above legislation.

Somebody asked how to make money out of understanding this. Simple. Sell sovereign credit default swaps to those who are hard of accounting and still believe sovereigns can default. Unfortunately to do that you need to be a big bank - funny that.

People *spending* money rather than saving it causes a boom, not a bust. The opposite is also true. An excess of saving, which is what this mythical 'debt' actually is, tends to cause a reduction in activity.

What crap.
Ultimately no entity can afford to keep living beyond its means (ie issuing ever increasing amounts of debt) indefinitely. Just because you have a printing press doesn't change the laws of production and consumption.

Seriously, just stop with the magic money tree idea. It's total nonsense.