Yep. Reducing taxes like that, VAT, employers NI etc or schemes like the car scrappage scheme are exactly what should happen to help stimulate economic activity.

But of course that increases the deficit and debt.

Why do people continue to equate the interests of those pushing for austerity with their own?

From their perspective it is working just fine.

Kind of reminds me of Dick Cheney entering Iraq without an exit plan. How forgetful of him ...

Yes because history shows thar such a programme failed so spectacularly post-WW2

Shortly after the global banking crisis, Brown and Darling reduced VAT in an attempt to keep stimulus in the economy. In 2010 the economy was growing and employment was rising again. Unfortunately the bunch of sociopaths who then took charge seized the opportunity to shrink the state in the name of "austerity". This ideological decision led to an immediate reversal of that (albeit sleight) growth, a reduction in spending power and real hardship for those at the bottom of the income scale.

Economic illiteracy at its finest

NR was a simple bank unlike, say, RBS. So, the reason other banks would not lend to them was because they perceived a risk of default.

The circumstances are completely different to post WW2. Then there was major rebuilding in the UK, Europe, Japan etc - therefore a huge stimulus to the world economy. Given the UK, despite being broke, was such a major producer it was always going to get a big slice of the growth action. Accordingly, your approach made sense. Now the situation is far different and the full flung anti-austerity approach would, I suspect, prove disastrous.

No it wasn't. It was because the other banks didn't have any money to lend and Northern Rock was more exposed to a drying up of the credit markets since that's where most of their funding came from.

rlhttps://www.bbc.co.uk/news/world-europe-33578778rl

Pretty much spot on from Varoufakis. Frankly, I think the way he's been demonised in the media is a disgrace. The guy is a legendary economist, and one of the finest of his era, he (and people like him) should be the ones leading the EU economy out of crisis, instead of the neo-classical talking heads currently at the head of the table.
On a slightly separate note, I recommend his book [iA Modest Proposal[/i which he wrote with Stuart Holland. I think it's a must read for anyone with an interest in the Eurozone crisis.

Banks had money to lend, they were just frightened of lending to other banks as they did not know where the losses stopped.

Pre-failure, NR had a big surge in mortgage lending, yet its share price fell and it issued a profits warning. Would seem everyone but its management and the FSA saw the writing was on the wall!

You are completely wrong. The reason why NR went belly up was because of its business model whereby it borrowed money in the UK and international money markets so it could provide mortgages which it then sold on. The market for these re-sold mortgages dried up due to the 2008 crisis and so due to lack of revenue as it was unable to re-sell the mortgages, its source of funds to repay the loans it had already taken out dried up.

They were engaged in the exact same thing as Fannie mae and Freddy mac were in the US. Bundling up mortgages to create a Mortgage Backed Security (MBS) and selling it to the secondary mortgage market. When that market dried up, so did NR's ability to meet its creditors.

It wasn't its inability to borrow that killed it but its inability to sell on mortgages to fund is already existing debt that did for it.

Now we are getting somewhere. No one would buy because they were worried about what was bundled (ie the potential for defaults within the bundle)!

Varoufakis has been totally discredited not just by the media but by his record.

At the start of this year things were looking up for Greece with a poll of economists predicting 2% growth for 2015 following 2014's modest 0.8% growth. Unemployment while very high had edged lower. The same group of economists now predict outright recession this year with even worse to come.

The reason for this adverse change is the election of the Syriza government in late January. They have plunged the economy into uncertainty and snuffed out the positive signs that they inherited. They showed little sign of wanting to negotiate seriously and niavely played poker with the EU and instead of gaining sympathy and substantial concessions from their creditors and so ended up accepting a much worse set conditions with much worse austerity to come.

Varoufakis has to take a big share of the responsibility for their failed strategy and for a dire lack of financial management of their economy. He was the one to whom the MD of the IMF directed the remark about the need for "adults in the room" for any future negotiations and led to him being sacked.

The six month experience of the ultra left wing Syriza with their dysfunctional government of academics and dreamers has set the economy back years. As the IMF have pointed out earlier in the year it was thought that Greece would require no further debt relief. It now believes it will need a further €50 billion over 2015-18. The bill that the poor Greek people will have pay for 6 months of Varoufakis and Tsipras is huge.

Billy the Kid was legendary but he was still a criminal.

Wrong again it wasnt the threat of their mortages going bad - we didnt have anything the default issues we had in US. They just got caught up in the whole mailstroom of financial issues surrounding sub prime mortgages getting AAA ratings.

As I said the market for their MBS's dried up. Why it dried up isn't the issue, it's [ibecause[/i it dried up they had no funds to meet their creditors.

The similarity to Mae and Mac in the US is that is exactly what those organisations did, sell MBS's. The fact no one wanted to buy Northern Rock's MBS's anymore was virtually certain to be because Mac and Mae effectively killed the market due to the sub-prime issue, (they were selling bundles of worthless mortgages no one wanted so you'd have to be a bit of an idiot to think MBS's were still a good idea whoever was selling them).

Well austerity does have a negative impact on GDP. That is an economic fact and as the Greek's have just had more austerity heaped on them why would you expect any different? You don't need to believe me the IMF will tell you the same thing.



Simplistic nonsense. They haven't snuffed anything out. Greece has been running a budget surplus and continues to do so if you disregard loan repayments. Of course you can't because if those repayments exceed the surplus you still have to borrow money to pay your creditors and that is what the whole argument has been about. Restructuring the debt so Greece can pay its creditors which it can't if this doesn't happen.



The IMF pointed out what Varoufakis and Tsipras have been saying all along. That without debt relief there isn't a viable solution. On that they were signing from the same hymn sheet and to suggest otherwise is being disingenuous. What Varoufakis and Tsipras wanted was debt relief without further austerity as they believed that would contract the economy and make matters worse not better. This is not a controversial view and one shared by plenty of respected economists outside if Greece. The German's were having none of it and have won.

Of course austerity has a negative effect on GDP as it did in Ireland, Portugal and Spain. The difference with Greece, as I pointed out earlier in this thread, is that they failed to implement the fiscal and monetary structural changes that they had agreed to before they took the money. Had they done so they would have been in a better position. However this was the fault of the administration over the previous 5 years.



Despite the previous succession of poor governments in Greece there were some positive economic signs by January (small though they were) and as I said until these Syriza comedians took over and set the whole thing back by a further €50 billion. The debt will have to be restructured but without the necessary structural changes which include collecting taxes, real changes to the overgenerous pension terms for state workers, reducing the top heavy public sector etc etc




What Varoufakis and Tsipras say and do are quite different things. They may have had good intentions but they have made the situation much worse for the Greek people.

Their negotiating tactic was based on a scene from a restaurant in Athens"table 2 can't pay their bill.......they've taken a vote, hoping you'll reduce the amount owing and lend them the money to pay the remainder"[/i