Dear Red Rag (I don't know your name, so you can take your blog's name),
Like most left-wing blogs which rely more on rhetoric than on facts, you have comments turned off on your blog. Just as well or you'd be spending a lot of time moderating the truth to keep it quiet. Fortunately, after giving you a schooling on the forum, I figured I'd point out the fallacies in your laughable latest post about the economy.
What you did was link to this piece of advertising from Money Week (actually you linked to this video version of it, but some of my readers might prefer to read it), probably without reading / watching the piece, because it was predicting some doom & gloom in the economy and you figured that it must be discrediting the latest budget.
So, without further ado, let's take a look at exactly what you're saying, what Money Week is saying, and then we'll sum up a little conclusion about your views and how they fit in with this.
I think your blog title makes it fairly obvious that you're a Labour voter, so obviously seeing a leftie link to such a right-wing capitalist publication was a bit surprising. Usually it's fairly easy to just dismiss your blogs as angry rants about the cuts, but this time I had to see whether you actually had any content.
It is worth mentioning that the video is an advert to encourage people to subscribe to Money Week, a leading independent financial paper, by offering them investment options. Therefore it's hardly surprising that it's absolutely filled with sales speech and buzz words, but that doesn't discredit its contents.
However, it does discredit something you said, doesn't it?
...they have nothing to gain from talking down the economy.
Really? So a magazine trying to sell to people who are investors has nothing to gain by convincing them that they need their investment advice? That's a new one.
Anyway, let's take a quick look at your key claim, Red Rag:
"It explains to people how the economy is going to collapse bigger than the one we have seen only two years ago."
Evidently this is a misleading statement. The only place that the Money Week article suggests a 'bigger dip' is in the property market, and they blame that squarely on the Labour government in power at the time:
"They slashed interest rates… held off stamp duty... and recapitalised the banks, urging them to lend to would-be buyers.
Naturally, the market responded. Property prices quickly bottomed out.
But the fact is, the property market should have crashed in 2007.
And if the government had left it to run its course… yes, we would have seen a worse dip…
…but NOTHING like the catastrophe now lying in wait."
This is not exactly the coalition-bashing rhetoric I was expecting from Red Rag's description -- in fact, it looks like they place the blame on Labour -- but let's take a deeper look at the four assets which Market Week are suggesting that major investors should avoid.
1. Property
Well, we've already touched on this one. Money Week is suggesting that we will see a crash in property prices, and the fact that banks are unwilling to lend at current prices probably supports this, but as we see above, the blame for this can be attributed to Labour's market intervention in 2007.
However, lowering housing prices will improve peoples' access to the market, diversifying ownership of properties instead of keeping them all in the hands of rich landlords. Maybe Labourites are against the idea of the poor getting on the housing ladder, still, but the rest of us aren't
Verdict: Labour's fault, but could stimulate spending anyway.
2. The FTSE
Of the four proposed toxic assets in the article, this is the one for which success or failure could be most attributed to Osborne's budget, though it hasn't performed well against gold or oil over the years so even that link is debateable.
But Red Rag's source, Money Week, are suggesting that a double whammy of companies cutting back on their workforces and the quantitive easing scheme (printing money) of the last Labour Government have inflated the price of major stocks.
This “new money” is not backed by gold, or sales of cars, or wheat, or Barbie dolls — or anything. It is just made up — out of thin air.
Is it really any wonder house prices have been going up when nobody’s buying... or that shares are rising when real profits are down?
Here’s one way to get a grip on this idea: it is as if the whole economy and financial markets are responding to money that isn’t really there — phoney money, in other words...
So, it looks like this one is mostly Labour's fault as well, Red Rag. Your claims really aren't doing much to discredit the coalition at all yet, are they?
Verdict: Labour's fault.
3. The Euro
I'll quote this one directly from Money Week, because I really think that this shows that Red Rag hasn't read the article he's drooling over in his post:
Take Portugal for example...
Its combined private and public sector debt adds up to well over 200% of its entire annual income!
How serious is that? Well imagine owing the bank twice your yearly salary...
You could cut back on new clothes, going out, even food, but the fact remains... you’ve already spent two years worth of your future income.
Really, he can't have read this. I mean for a first point, he's a massive enemy of spending cuts, and Portugal's debt is the result of not making those spending cuts, but for a second, this toxic asset is THE EURO.
How exactly is he blaming George Osborne for a declining state in the stability of the Euro?
Yes, George, really.
I mean basically, the fear of Money Week is that the Euro will become weakened, which will damage the value of investments in that currency, but this would be fantastic news for most people in the UK.
In order for this to be an issue, the GBP to EUR conversion rate has to come in favour of the Pound, so evidently if you see this as an issue, you want to see a weak Pound. The weak Euro will bring down prices of items imported from Europe, make us more able to go on holidays to the continent and vindicate our decision to stay out of the single currency.
Verdict: Not a bad thing at all.
4. Government Bonds
Just when I thought that the article couldn't look any worse for Red Rag, I saw the last item on the list. Yes, one of his issues with George Osborne's management of the economy is simple.
We, the taxpayer, don't pay enough interest on government borrowing to rich investors.
Maybe Red Rag overlooked the fact that this is actually an indication of our good credit rating, and as such suggests that Osborne's economic management has kept credit ratings agencies (in other words, guys who know a lot more than he does about economics and sovereign debt) confident in our economy.
Verdict: Definitely not a bad thing
So, two things which can be blamed on Labour and two which aren't even bad for the vast majority of people in the UK. Looks like the coalition can be let off the hook for this one, job done?
Nah, that's not all, by elaboration we can work out that as Red Rag is against all of these things, he stands for:
- Expensive property, fixing the housing market in favour of rich landlords and against the poor and middle classes.
- A stock market falsely inflated by quantitive easing.
- A weak pound, causing import costs to balloon and holidays abroad to be very expensive.
- High interest rates on our sovereign debt, indicating irresponsible fiscal policy.
Well, at least this is consistant with his voting habits.
