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DoubleD

"The Brexit Effect"

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Previously everything that was negative in economic outcome was blamed on "austerity" which was often a myth. Now everything is blamed on the "Brexit Effect".

When will our media start reporting accurately and stop feeding this diatribe? By continually feeding it, it becomes engrained in people's subconsciousness and is the scapegoat for all matters, even when unrelated.

Even the politicians are as bad as the media when they were setting fuel to the fire about supposed "austerity" in cases when it had nothing to do with it

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Negative outcomes blamed on austerity were often a myth? Have you got any evidence of this to provide? Similarly, any such evidence for what you term "the Brexit Effect"?

As far as I can understand, contractionary fiscal policy in a time of economic downturn would have negative macroeconomic impacts, namely:

1) Direct reduction in Aggregate Demand/GDP through the reduction in government spending

2) Indirect reduction in consumption due to the fall in government spending, particularly due to the fact that this fall in government spending disproportionately affected the poor. The poor have a lower propensity to import and a higher propensity to consume, therefore a regressive change to fiscal policy (as seen under austerity) has more significant consumption effects than fiscal policy affecting any other part of the income distribution

3) Indirect reduction in investment due to the fall in consumption. Lowered consumption reduces any returns to potential investment and therefore disincentivises it. 

Now I admit, while I have a degree in economics, I am no expert. However, it would appear the experts agree with me. Two-thirds of economists surveyed by the Centre for Macroeconomics said austerity had harmed the economy, and the OBR also said that austerity had a negative effect on GDP growth. Maybe what you perceive to be a diatribe, those more informed about the topic may call facts? 

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You've misinterpreted me and gone off at a tangent but that's fine.

My point being that often negative stories were attributed to 'austerity' when the reality is spending has actually risen - healthcare being a prime example.

It would have been nice if we had actually introduced some austerity so we weren't in a position whereby we are spending more on servicing public debt than we are on defence or public order, but i digress.

My original point is that the media often incorrectly report by feeding these 'buzz words', the 'Brexit effect' being the latest one

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31 minutes ago, DoubleD said:

My point being that often negative stories were attributed to 'austerity' when the reality is spending has actually risen - healthcare being a prime example.

If spending rises less than the costs increase, is that something that should be reported?

If a budget is restricted, should the consequences be reported?

I am very interested in the lots of stories that falsely attribute negative events to budget cuts?  You must have lots of examples?

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1 hour ago, DoubleD said:

You've misinterpreted me and gone off at a tangent but that's fine.

My point being that often negative stories were attributed to 'austerity' when the reality is spending has actually risen - healthcare being a prime example.

It would have been nice if we had actually introduced some austerity so we weren't in a position whereby we are spending more on servicing public debt than we are on defence or public order, but i digress.

My original point is that the media often incorrectly report by feeding these 'buzz words', the 'Brexit effect' being the latest one

Have you told Ckn about how healthcare spending has increased? His NHS thread seems to give the opposite impression, unless I have misinterpreted him.

Any specific stories where Brexit is being blamed (or austerity was) and they weren't a factor? You're remarkably short of evidence so far.

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30 minutes ago, Saint 1 said:

Have you told Ckn about how healthcare spending has increased? His NHS thread seems to give the opposite impression, unless I have misinterpreted him.

Any specific stories where Brexit is being blamed (or austerity was) and they weren't a factor? You're remarkably short of evidence so far.

Sorry I didn't realise i needed to run everything past Ckn first, my bad. See below.

You don't have to look very far, you can't go a day without hearing a story which is blamed on the Brexit effect. Whether it's a fall in retail sales, worsening in companies positions, the fact that the Aviva Premiership or 6 Nations can't get as good sponsorship deal, you name it. However, seeing as you can't be bothered looking or seem oblivious to it, here are some of the more comical ones.........

http://www.independent.co.uk/news/business/news/starbucks-brexit-blame-profit-slump-61-per-cent-coffee-shop-2016-a7682636.html

I'm sure consumers think long and hard about the impact of Britain leaving the EU when they consider buying a coffee from Starbucks or not

https://www.neweurope.eu/article/champagne-sales-drop-brexit-blamed/

Nothing to do with consumer tastes shifting to prosecco or gin of course

https://www.standard.co.uk/news/uk/rail-commuters-face-brexit-fare-hike-of-nearly-four-times-the-one-per-cent-public-sector-pay-cap-a3580271.html

Sensationalist headlines like this are common. Of course the fall in the fx has an impact upon inflation, but implications that the inflation rise in fares is down to Brexit is misleading.

 

image.thumb.png.fb761d686046165c1456cc8406b05e8f.png

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2 hours ago, Bedford Roughyed said:

If spending rises less than the costs increase, is that something that should be reported?

In a balanced way, yes

2 hours ago, Bedford Roughyed said:

If a budget is restricted, should the consequences be reported?

When is a budget not restricted? I would be very interested in examples

2 hours ago, Bedford Roughyed said:

I am very interested in the lots of stories that falsely attribute negative events to budget cuts?  You must have lots of examples?

There are lots, yes, just look at anything on the NHS.

If by not restricting spending to (and i know it sounds a crazy idea) be within our means of income, and continuing to spend lavishly, exacerbating our debt and annual interest payments, which are now a greater burden than what we spend on defence or public order, should the consequences to future generations not be reported?

This balance in reporting is sadly lacking

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39 minutes ago, DoubleD said:

Sorry I didn't realise i needed to run everything past Ckn first, my bad. See below.

You don't have to look very far, you can't go a day without hearing a story which is blamed on the Brexit effect. Whether it's a fall in retail sales, worsening in companies positions, the fact that the Aviva Premiership or 6 Nations can't get as good sponsorship deal, you name it. However, seeing as you can't be bothered looking or seem oblivious to it, here are some of the more comical ones.........

http://www.independent.co.uk/news/business/news/starbucks-brexit-blame-profit-slump-61-per-cent-coffee-shop-2016-a7682636.html

I'm sure consumers think long and hard about the impact of Britain leaving the EU when they consider buying a coffee from Starbucks or not

https://www.neweurope.eu/article/champagne-sales-drop-brexit-blamed/

Nothing to do with consumer tastes shifting to prosecco or gin of course

https://www.standard.co.uk/news/uk/rail-commuters-face-brexit-fare-hike-of-nearly-four-times-the-one-per-cent-public-sector-pay-cap-a3580271.html

Sensationalist headlines like this are common. Of course the fall in the fx has an impact upon inflation, but implications that the inflation rise in fares is down to Brexit is misleading.

So to confirm: a decline in consumer confidence will not manifest itself in a decrease in consumption, particularly in luxuries like champagne and Starbucks? A significant depreciation of the currency will not increase costs, particularly on products either imported or with imported components? 

The rise in inflation is due to Brexit. The regulated fares are capped in line with inflation. Therefore, the rise in inflation, due to Brexit, has led to an increase in rail fares. Which part of that statement is false? 

Edited by Saint 1

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5 minutes ago, Saint 1 said:

So to confirm: a decline in consumer confidence will not manifest itself in a decrease in consumption, particularly in luxuries like prosecco and Starbucks? A significant depreciation of the currency will not increase costs, particularly on products either imported or with imported components? 

The rise in inflation is due to Brexit. The regulated fares are capped in line with inflation. Therefore, the rise in inflation, due to Brexit, has led to an increase in rail fares. Which part of that statement is false? 

Prosecco sales have risen lol and so have sales in Costa, you clearly haven't read this properly have you?

The rise in inflation in previous years and in countries outside the UK is due to Brexit too right? Yeah, thought not.....

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7 minutes ago, DoubleD said:

In a balanced way, yes

When is a budget not restricted? I would be very interested in examples

There are lots, yes, just look at anything on the NHS.

If by not restricting spending to (and i know it sounds a crazy idea) be within our means of income, and continuing to spend lavishly, exacerbating our debt and annual interest payments, which are now a greater burden than what we spend on defence or public order, should the consequences to future generations not be reported?

This balance in reporting is sadly lacking

So austerity budgets that have reduced police numbers, have slashed council spending, closed libraries, cut armed forces numbers, etc, etc,etc, have nothing to do with budget restrictions?

No one is calling for unrestricted spending (nice strawman), but when budget rise bellow real costs then you have cuts.  When you do that year after year, then eventually you start to see major issues arise.  

We will hit the next recession without having the major growth spurt that normally happens in between at this rate.  

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2 minutes ago, DoubleD said:

Prosecco sales have risen lol and so have sales in Costa, you clearly haven't read this properly have you?

The rise in inflation in previous years and in countries outside the UK is due to Brexit too right? Yeah, thought not.....

Prosecco was meant to say champagne, amended now. Brexit isn't dictating that every business will fail. But yes or no, are you making the argument that increased imported costs and decreased consumer confidence won't hit the bottom line of firms on average?   

Nobody is making the argument that every single rise in inflation ever is due to Brexit, but you're good at this strawman business. This rise in inflation is due to Brexit though. The Monetary Policy Committee for the Bank of England tend to know a little bit about macroeconomics, particularly inflation. Here's what they said in their August monetary policy summary:

"CPI inflation rose to 2.6% in June from 2.3% in March, as expected. The MPC expects inflation to rise further in coming months and to peak around 3% in October, as the past depreciation of sterling continues to pass through to consumer prices. Conditional on the current market yield curve, inflation is projected to remain above the MPC’s target throughout the forecast period. This overshoot reflects entirely the effects of the referendum-related falls in sterling."

Are you saying they are wrong? 

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2 minutes ago, Saint 1 said:

Prosecco was meant to say champagne, amended now. Brexit isn't dictating that every business will fail. But yes or no, are you making the argument that increased imported costs and decreased consumer confidence won't hit the bottom line of firms on average?   

You see similar in climate change debates, things have happened before therefore the current thing happening can't be affected by our current actions.  Economics like the climate will carry on being chaotic, but we know some of the underlying trends have been changed by brexit/auserity or CO2, this then has an impact on the scale of other events.  

I find economics a very hard subject to be honest.  

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36 minutes ago, Bedford Roughyed said:

So austerity budgets that have reduced police numbers, have slashed council spending, closed libraries, cut armed forces numbers, etc, etc,etc, have nothing to do with budget restrictions?

No one is calling for unrestricted spending (nice strawman), but when budget rise bellow real costs then you have cuts.  When you do that year after year, then eventually you start to see major issues arise.  

We will hit the next recession without having the major growth spurt that normally happens in between at this rate.  

I'm not sure what you're getting at in your first 2 sentences, as I haven't/don't disagree with that. (although i do think a lot of libraries have passed their usefulness vs cost).

Exactly, and that's why a number of economists believe we should actually have enacted austerity initially, in the early stages of recession. This is what Ireland did. The cuts were severe and painful initially, but they have bounced back much quicker. If you look at countries which laboured their way through it, tinkering around the edges, without making proper reforms, then they've become paralysed in low growth (Italy, France and to some extent ourselves, although some would argue we did have a growth spurt).

And if we haven't brought down the deficit and public debt by the time of the next recession, what do you think will happen then?

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33 minutes ago, Saint 1 said:

Prosecco was meant to say champagne, amended now.

Are you saying prosecco isn't a luxury now then?

35 minutes ago, Saint 1 said:

 Brexit isn't dictating that every business will fail.

But that's the excuse continually rolled out

37 minutes ago, Saint 1 said:

Nobody is making the argument that every single rise in inflation ever is due to Brexit, but you're good at this strawman business. This rise in inflation is due to Brexit though. The Monetary Policy Committee for the Bank of England tend to know a little bit about macroeconomics, particularly inflation. Here's what they said in their August monetary policy summary:

"CPI inflation rose to 2.6% in June from 2.3% in March, as expected. The MPC expects inflation to rise further in coming months and to peak around 3% in October, as the past depreciation of sterling continues to pass through to consumer prices. Conditional on the current market yield curve, inflation is projected to remain above the MPC’s target throughout the forecast period. This overshoot reflects entirely the effects of the referendum-related falls in sterling."

Are you saying they are wrong? 

No, what is factually correct, is that the rise in inflation is exacerbated by the fall in the exchange rate, which can to some part be attributed to the Brexit decision. Are you saying without Brexit, there would be no increase in inflation?

It should also be noted that the £ has appreciated significantly vs the $ in the past month when looking at forecasting

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6 minutes ago, DoubleD said:

No, what is factually correct, is that the rise in inflation is exacerbated by the fall in the exchange rate, which can to some part be attributed to the Brexit decision. Are you saying without Brexit, there would be no increase in inflation?

It should also be noted that the £ has appreciated significantly vs the $ in the past month when looking at forecasting

Yes, you got me, Brexit is the sole driver of inflation because no other macroeconomic factors exist at all and all other conditions permanently hold, that is what I am arguing. In April 2016, inflation was under 0.5%. By July 2016, it was just over 0.5%. As the currency depreciation has filtered through, it is now 2.9%. That's a pretty big rise to claim it was only exacerbated, not driven by.

"Conditional on the current market yield curve, inflation is projected to remain above the MPC’s target throughout the forecast period. This overshoot reflects entirely the effects of the referendum-related falls in sterling." The MPC seem to be under the impression that at least the 0.9% of that inflation is driven entirely by Brexit. Not me. The MPC, the experts on this topic.  Are they wrong? 

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1 hour ago, Saint 1 said:

So to confirm: a decline in consumer confidence will not manifest itself in a decrease in consumption, particularly in luxuries like champagne and Starbucks? A significant depreciation of the currency will not increase costs, particularly on products either imported or with imported components? 

The rise in inflation is due to Brexit. The regulated fares are capped in line with inflation. Therefore, the rise in inflation, due to Brexit, has led to an increase in rail fares. Which part of that statement is false? 

As someone who actually likes coffee, I'm not sure Starbucks counts as a luxury. Having tasted the toxic swill they dish up, it is more like a punishment from a vengeful Old Testament deity.

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5 hours ago, DoubleD said:

You've misinterpreted me and gone off at a tangent but that's fine.

My point being that often negative stories were attributed to 'austerity' when the reality is spending has actually risen - healthcare being a prime example.

It would have been nice if we had actually introduced some austerity so we weren't in a position whereby we are spending more on servicing public debt than we are on defence or public order, but i digress.

My original point is that the media often incorrectly report by feeding these 'buzz words', the 'Brexit effect' being the latest one

Spending may have gone up in certain areas but it's not gone up by inflation meaning a real-terms decrease.  For example, inflation at 2.7% while giving a 1% pay rise is an effective 1.7% pay cut.  Put that against the fact that there's been a "public sector pay freeze" since 2011 and build in compound negative interest and you get some pretty large real-terms pay cuts.  That's the same for many areas of expenditure.  "Austerity", "Brexit", whatever, if it's causing those who need it the most to see massive cuts in service and pay then it's irrelevant where it comes from.

Please let me know and I'll show you exactly where the cuts in the NHS are despite the absolute amount spent increasing year on year.  Absolute amount increase is lower than inflationary cost increase meaning cuts.  Unless you happen to be a Tory minister and you're pretending that it really is a genuine increase in expenditure.

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48 minutes ago, Saint 1 said:

Yes, you got me, Brexit is the sole driver of inflation because no other macroeconomic factors exist at all and all other conditions permanently hold, that is what I am arguing. In April 2016, inflation was under 0.5%. By July 2016, it was just over 0.5%. As the currency depreciation has filtered through, it is now 2.9%. That's a pretty big rise to claim it was only exacerbated, not driven by.

"Conditional on the current market yield curve, inflation is projected to remain above the MPC’s target throughout the forecast period. This overshoot reflects entirely the effects of the referendum-related falls in sterling." The MPC seem to be under the impression that at least the 0.9% of that inflation is driven entirely by Brexit. Not me. The MPC, the experts on this topic.  Are they wrong? 

0.9% seems plausible. Of course what we don't know is what the fx and inflation would have done if we'd decided to stay. The fx has been on the decline vs the $ for many years now 

To try and get this vaguely back to point, if you actually read my earlier posts, my issue is with misleading reporting - for instance the Evening Standard link implied in it's headline that commuters face a fare hike of nearly 4% due to Brexit. That is incorrect 

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21 minutes ago, ckn said:

Spending may have gone up in certain areas but it's not gone up by inflation meaning a real-terms decrease.  For example, inflation at 2.7% while giving a 1% pay rise is an effective 1.7% pay cut.  Put that against the fact that there's been a "public sector pay freeze" since 2011 and build in compound negative interest and you get some pretty large real-terms pay cuts.  That's the same for many areas of expenditure.  "Austerity", "Brexit", whatever, if it's causing those who need it the most to see massive cuts in service and pay then it's irrelevant where it comes from.

Please let me know and I'll show you exactly where the cuts in the NHS are despite the absolute amount spent increasing year on year.  Absolute amount increase is lower than inflationary cost increase meaning cuts.  Unless you happen to be a Tory minister and you're pretending that it really is a genuine increase in expenditure.

Ckn I've provided evidence already but I'd rather not derail this thread anymore than it already has. Although in honesty, I think it's probably run its course now.

We can leave matters such as whether we should spend our way out of debt for other threads

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I said as much during the referendum thread but sh*t happens, always has, always will. That they now attribute everything to brexit is not unexpected in the least. I can only imagine what they'd say if the banking crash of '08 happened today.

The pound to euro was almost level in early 2008 or 09, what was that about? Yet today it's because of brexit and a disaster. But must have been alright then.

And I aren't saying there will be no repercussions of brexit either, just not most of what they claim.

Hang on, what am I saying, brexit is clearly behind the Catalans situation.

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7 hours ago, Johnoco said:

I said as much during the referendum thread but sh*t happens, always has, always will. That they now attribute everything to brexit is not unexpected in the least. I can only imagine what they'd say if the banking crash of '08 happened today.

The pound to euro was almost level in early 2008 or 09, what was that about? Yet today it's because of brexit and a disaster. But must have been alright then.

And I aren't saying there will be no repercussions of brexit either, just not most of what they claim.

Hang on, what am I saying, brexit is clearly behind the Catalans situation.

That was about the lowering of the interest rate and a programme of quantitative easing which caused a depreciation of the currency. This depreciation couldn't be counteracted adequately by the MPC because they have to consider the wider economic impact of monetary policy, and low levels of growth meant they couldn't increase the interest rate to cause the pound to appreciate. Of course it wasn't alright then. However, that time it wasn't entirely self-inflicted.

 

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4 hours ago, Saint 1 said:

That was about the lowering of the interest rate and a programme of quantitative easing which caused a depreciation of the currency. This depreciation couldn't be counteracted adequately by the MPC because they have to consider the wider economic impact of monetary policy, and low levels of growth meant they couldn't increase the interest rate to cause the pound to appreciate. Of course it wasn't alright then. However, that time it wasn't entirely self-inflicted.

 

That means nothing to the  man/woman/fluid gender person in the street though, the effect is still the same. I remember almost getting parity for my euros then....the causes behind it offered no comfort to my attempts to get hammered in the Winston Churchill pub on the Costa del crime. 

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8 minutes ago, Johnoco said:

That means nothing to the  man/woman/fluid gender person in the street though, the effect is still the same. I remember almost getting parity for my euros then....the causes behind it offered no comfort to my attempts to get hammered in the Winston Churchill pub on the Costa del crime. 

We're back to the fatalistic approach then.  Bad things have always happened and because of that I'm going to get angry when people work out the underlying reasons for those bad things.

If you remember, the terrifying Project Fear did not suggest that bad things wouldn't happen in the future if we voted to stay just that the likelihood was that more bad things of greater impact would happen as a result of leaving.

You can pretend that major actions such as leaving the EU can't be shown to have any consequences if you like.  But that's all it is: a pretence.

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