Should We Leave the EU?

[yorksrob]

Yet again, you're putting what-ifs against reality: we are constructing almost double-digits of HVDCs to improve power inter-connection throughout Europe. This makes sense as part of the EU, as a common energy market means lower prices for everyone as power can be best redirected to where it is needed, and economies of scale can be created.

Banging on about fortress Britain and self-sufficiency isn't going to achieve anything. Are we just going to fire up tens of coal powerplants again?

We should have been investing in a diverse range of power sources. However relying on elsewhere for energy is only going to mean we have to pay for it from somewhere else. More revenue lost in the long term.

 

[TheKnightWho]

We should have been investing in a diverse range of power sources. However relying on elsewhere for energy is only going to mean we have to pay for it from somewhere else. More revenue lost in the long term.

And why is that?

 

[LateThanNever]

On the first point, that's certainly true as far as I can see, and the EU's greater willingness to stand up to mis-behaving multinationals certainly goes in the pro column.

With regard to high energy bills, I stand by my point made earlier in the thread that our over-reliance on the common market in energy is indeed a weakness and that we need to be aiming for more self-sufficiency in that sector.

As you say - and the government still refuses to give the Swansea Bay tidal energy plan straightforward encouragement - which is just such an obvious win.
(The current government of millionaires are really too interested in their own futures rather than ours.)

 

[yorksrob]

And why is that?

Because we'll have to pay for it, which is money we won't have available to spend in the British economy.
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As you say - and the government still refuses to give the Swansea Bay tidal energy plan straightforward encouragement - which is just such an obvious win.
(The current government of millionaires are really too interested in their own futures rather than ours.)

Yes, we should be investing in and developing tidal. It's the renewable that is predictable and abundant to us.

 

[LateThanNever]

Don't patronise me. Banks do not create money by lending: they transfer capital to where it can be spent; they are not "creating money out of thin air". If you look, the central banks create money, but this is heavily regulated by government.

And I am perfectly aware of what happened in the subprime mortgage crisis. However, I'd really like to see evidence for 90% of loans being mortgages!

I'm regrettably not patronising you - I wish I were - you haven't read the link. Look at it.
Banks create money whenever they create loans. And in Britain that is 97 % of all money created. The other 3 % is printed. Regulated it may be, but "heavily" is not the case. In Hong Kong I might agree - or in Japan before they changed their system on advising the banks how to lend. Now having changed it they are stuck in permanent flat lining. Is that what you think is desirable?
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What is the EU for and what is it's ambition?

As I understand it, the EU wishes that all the member states eventually become regions of a European superstate in the same way as Lincolnshire, Yorkshire, Dorset etc are shires of England. History shows even this wasn't done peacefully.

How long will this ambition take? As slowly as it takes to fool the ordinary European people that nothing is happening. Jean Monnet one of the founders advised this.

How will so many different states with their different languages, culture, laws and history be able to work together in the same way as the United States of America? Several countries are currently taking massive punishment (eg Greece) in order to be part of the single currency Eurozone - how much longer will it take before they are all equal?

Would you like your sons to receive call up papers with the EU Ring of Yellow flag on the envelope rather than OHMS?

As desirable as a single European superstate sounds, I struggle to imagine this happening without strife somewhere in Europe in the future - even the United States had a big civil war during the 19th Century before becoming a nation.

This unrealistic desire to become a superstate is why I am voting to leave.

So the fact that Google, for example, which is a global, unaccountable, tax avoiding, 'superstate' corporation whose chief executive came to Brussels to explain himself, but not to Westminster, leaves you entirely happy?

 

[TheKnightWho]

Because we'll have to pay for it, which is money we won't have available to spend in the British economy.

So producing energy domestically is free, is it?
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I'm regrettably not patronising you - I wish I were - you haven't read the link. Look at it.
Banks create money whenever they create loans. And in Britain that is 97 % of all money created. The other 3 % is printed. Regulated it may be, but "heavily" is not the case. In Hong Kong I might agree - or in Japan before they changed their system on advising the banks how to lend. Now having changed it they are stuck in permanent flat lining. Is that what you think is desirable?

They transfer money from one format to another, but they do not 'create' it. Specifically, M3 to M1 (in the case of commercial banks lending to consumers, anyway).

 

[yorksrob]

So producing energy domestically is free, is it?

No, but when you pay someone to produce energy domestically, a large proportion of that money is available to be spent again, domestically.

 

[TheKnightWho]

No, but when you pay someone to produce energy domestically, a large proportion of that money is available to be spent again, domestically.

Just as our energy partners are free to buy British exports, produced with the energy purchased abroad. That energy has to be created somehow, and if it's with foreign-bought coal etc. there's no advantage to producing it here. If the wealth created through that energy can be better directed to other areas of the economy, then it makes more sense to import that energy from abroad.

Britain does, actually, export quite a bit of energy too - and is forecast to do so more over the coming decades.

 

[Xenophon PCDGS]

All this said, my good lady wife and I will be happy to cast our votes in the referendum, without having a daily discussion with other people in the days leading up to that event.

The remote control "mute" button on the television has never normally been called upon so much in order to block out the sounds of those invited by the television companies, when they too will only be able to cast a single vote...

 

[yorksrob]

Just as our energy partners are free to buy British exports, produced with the energy purchased abroad. That energy has to be created somehow, and if it's with foreign-bought coal etc. there's no advantage to producing it here. If the wealth created through that energy can be better directed to other areas of the economy, then it makes more sense to import that energy from abroad.

Britain does, actually, export quite a bit of energy too - and is forecast to do so more over the coming decades.

As with everything, there are no black and white answers, however I believe that an over-reliance on foreign energy would represent a drain on the economy.

Using foreign coal will entail less value percolating down to the British economy than domestic coal, but even then there are the costs of generation which will provide additional value to the economy through those that work in the station, not to mention the industries that support the power station. This would be lost if we just imported the electricity.

 

[Mvann]

Interesting that Junkers has come out and said that some laws are better off being dealt with at a national level and that 83 laws have been taken off the commissions table. Wonder what the 83 were.

 

[TheKnightWho]

As with everything, there are no black and white answers, however I believe that an over-reliance on foreign energy would represent a drain on the economy.

Using foreign coal will entail less value percolating down to the British economy than domestic coal, but even then there are the costs of generation which will provide additional value to the economy through those that work in the station, not to mention the industries that support the power station. This would be lost if we just imported the electricity.

But why? It's not a drain if we're more economically productive for it. Those people who you want working in the plants can, if we import it, work elsewhere and more productively: that's the point I'm making.

Otherwise, by your logic, all imports would be bad as they would away domestic jobs, instead of enabling more productive ones.

 

[yorksrob]

But why? It's not a drain if we're more economically productive for it. Those people who you want working in the plants can, if we import it, work elsewhere and more productively: that's the point I'm making.

Otherwise, by your logic, all imports would be bad as they would away domestic jobs, instead of enabling more productive ones.

Fair point, but do those people end up working more productively. First of all we have to make something worth flogging to pay for the electricity.

All imports aren't bad, but it is bad when we import much more than we can export, which is what seems to be the case with our balance of payments deficit. It's particularly bad when we have to sell assets that should be generating wealth here, such as property, infrastructure and companies, to pay for goods such as food and energy. That is an unsustainable way to run an economy.

 

[Xenophon PCDGS]

Interesting that Junkers has come out and said that some laws are better off being dealt with at a national level and that 83 laws have been taken off the commissions table. Wonder what the 83 were.

I would rather face him than a Junkers Ju 88....

 

[TheKnightWho]

Fair point, but do those people end up working more productively. First of all we have to make something worth flogging to pay for the electricity.

All imports aren't bad, but it is bad when we import much more than we can export, which is what seems to be the case with our balance of payments deficit. It's particularly bad when we have to sell assets that should be generating wealth here, such as property, infrastructure and companies, to pay for goods such as food and energy. That is an unsustainable way to run an economy.

Well if they don't our growth (or even GDP) goes down, which it isn't currently. There's no incentive for that.

And yes, a balance of payments is good, but that's across the entire marketplace rather than just in energy.

 

[yorksrob]

Well if they don't our growth (or even GDP) goes down, which it isn't currently. There's no incentive for that.

And yes, a balance of payments is good, but that's across the entire marketplace rather than just in energy.

The problem is, it the balance of payments is bad across the whole of the economy.

 

[miami]

As with everything, there are no black and white answers, however I believe that an over-reliance on foreign energy would represent a drain on the economy.

Using foreign coal will entail less value percolating down to the British economy than domestic coal, but even then there are the costs of generation which will provide additional value to the economy through those that work in the station, not to mention the industries that support the power station. This would be lost if we just imported the electricity.

I'm willing to accept a desire for reduction in foreign energy dependencies. I'll also rank countries in terms of who to rely on, I'd rather rely on France for power than Russia for example, and Russia for power than Iran.

Your argument for leaving the EU seems to be something like "If we leave the EU things will get so bad we'll have no choice but to become self-sufficient"

The EU isn't preventing us from building tidal barages.

 

[LateThanNever]

So producing energy domestically is free, is it?
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They transfer money from one format to another, but they do not 'create' it. Specifically, M3 to M1 (in the case of commercial banks lending to consumers, anyway).

I don't understand this M jargon - but I fear that is old economics! Still I suggest that you recognise that although Building Societies do, Banks do not transfer money in any way whatsoever! I have to say again: Look at the Bank of England link. Private banks create money every time they create a loan. Indeed that is effectively the definition of a bank. If you want another justification then here:
http://www.sciencedirect.com/science/article/pii/S1057521914001434?np=y

 

[yorksrob]

I'm willing to accept a desire for reduction in foreign energy dependencies. I'll also rank countries in terms of who to rely on, I'd rather rely on France for power than Russia for example, and Russia for power than Iran.

Your argument for leaving the EU seems to be something like "If we leave the EU things will get so bad we'll have no choice but to become self-sufficient"

The EU isn't preventing us from building tidal barages.

I'd rather the EU gave us the freedom to correct some of these imbalances in our economy, rather than things getting bad before they get better.

 

[LateThanNever]

No, but when you pay someone to produce energy domestically, a large proportion of that money is available to be spent again, domestically.

Actually I think it is free as long as it is a British operation/company. Britain prints its money which we all have confidence in, so it is up to us to do what we wish - both with the energy and the money!

 

[miami]

I'd rather the EU gave us the freedom to correct some of these imbalances in our economy, rather than things getting bad before they get better.

Which imbalances? What do you think the UK government will do that it can't because the EU is preventing it from doing it?

 

[TheKnightWho]

I don't understand this M jargon - but I fear that is old economics! Still I suggest that you recognise that although Building Societies do, Banks do not transfer money in any way whatsoever! I have to say again: Look at the Bank of England link. Private banks create money every time they create a loan. Indeed that is effectively the definition of a bank. If you want another justification then here:
http://www.sciencedirect.com/science/article/pii/S1057521914001434?np=y

So you're happy to link things at me, but when I actually engage with economic terms you tell me that what I'm saying is old? Calling the names of the different kinds of money "old economics" betrays your total ignorance of the subject! You keep repeating the point that I have refuted multiple times; the Bank of England link is talking about different kinds of money: http://positivemoney.org/how-money-works/advanced/three-types-of-money/ and http://lexicon.ft.com/Term?term=m0,-m1,-m2,-m3,-m4 It's not a particularly difficult concept. What you seem to be espousing would lead to infinite inflation. Banks move money from savers to spenders; they do not create it, but they do have a multiplying effect on liquidity. That is where they "create" money, but when you trace back all the debt, all they've done is shifted spending power. That isn't to downplay the importance of that - it's what makes economies work - but you can't just say they create money in an effort to downplay my earlier point about investment.

You've also failed to make any kind of distinction between types of bank; the Bank of England link talks about central banks creating money for a start, not commercial ones.

I'm starting to think that I'm not the one who doesn't know what they're talkng about here.

 

[miami]

I don't understand this M jargon - but I fear that is old economics! Still I suggest that you recognise that although Building Societies do, Banks do not transfer money in any way whatsoever! I have to say again: Look at the Bank of England link. Private banks create money every time they create a loan. Indeed that is effectively the definition of a bank. If you want another justification then here:
http://www.sciencedirect.com/science/article/pii/S1057521914001434?np=y

For M0 to M4:

http://lexicon.ft.com/Term?term=M0,-M1,-M2,-M3,-M4

Different measures of money supply. Not all of them are widely used and the exact classifications depend on the country. M0 and M1, also called narrow money, normally include coins and notes in circulation and other money equivalents that are easily convertible into cash. M2 includes M1 plus short-term time deposits in banks and 24-hour money market funds. M3 includes M2 plus longer-term time deposits and money market funds with more than 24-hour maturity. The exact definitions of the three measures depend on the country. M4 includes M3 plus other deposits. The term broad money is used to describe M2, M3 or M4, depending on the local practice.

As a thought excecise -- it's been nearly 20 years since I did GCSE economics.

Bob has £100 and puts it in HSBC (HSBC has £100 cash inside it)
HSBC loans £90 to Carol and wants £10 interest (HSBC has £10 inside it and is owed £100 from Carol and owes Bob £100 - total £10 surplus)
Carol buys a car from Dave for £90
Dave puts £90 in his bank (HSBC has £100 inside it, but owes Bob and Dave a total of £190, and is owed £100 by Carol)
HSBC loans £80 out to Eric and wants £10 interest (HSBC has £20 inside it)
Eric pays Carol £80 for a ride to the station
Carol pays back £80 of the loan with HSBC (HSBC has £100 inside it, owes Bob and Dave £190, and is owed £20 by Carol and £90 by eric, so a surplus of £20)
Dave takes out £90 and pays Eric for a juggling performance. Eric repays his debt (HSBC £100 in cash, £20 in debt (from Carol). It owes £100 (to Bob)
Bob takes £20 out and pays Carol for gardening. Carol pays off her debt. (HSBC has £100 in cash, not owed anything, but owes £80 to Bob)
Bob takes £80 out and keeps it under the bed.(HSBC has £20 in cash, not owed anything, doesn't owe anyone)

Now al debts are paid and there's still £100 in the economy, it's just that a portion of the original £100 (£20) has been transferred to the Bank.

Half way through this game, it looks like HSBC has created an extra £90 (Bob and Dave have a total of £190 in their current accounts), but that money is backed by the debt of Carol and Eric, and once all debts are paid we see there's only really £100 in existence.

 

[furnessvale]

Interesting that Junkers has come out and said that some laws are better off being dealt with at a national level and that 83 laws have been taken off the commissions table. Wonder what the 83 were.

I too have no idea what the 83 are, but I wouldn't be taking bets AGAINST them being back on the table on 24th June.

 

[Barn]

Half way through this game, it looks like HSBC has created an extra £90 (Bob and Dave have a total of £190 in their current accounts), but that money is backed by the debt of Carol and Eric, and once all debts are paid we see there's only really £100 in existence.

It's slightly more than 'looks like'. For a while both Bob and Dave genuinely think that they have £190 of 'real' money between them and live their lives and make spending decisions as if they do, because bank deposits are thought of by the population as real money.

In a sense they are real money because of the deposit protection guarantee offered by Governments and their more general unwillingness to see banks fold. So effectively the deposit-taking and lending business of HSBC could be thought of as increasing real money.

 

[DynamicSpirit]

It's slightly more than 'looks like'. For a while both Bob and Dave genuinely think that they have £190 of 'real' money between them and live their lives and make spending decisions as if they do, because bank deposits are thought of by the population as real money.

In a sense they are real money because of the deposit protection guarantee offered by Governments and their more general unwillingness to see banks fold. So effectively the deposit-taking and lending business of HSBC could be thought of as increasing real money.

I believe that's correct, but my understanding is that there's more than that: If Bob puts £100 in the bank, then the bank is not limited to lending the £100, but is in fact permitted to lend several times that amount, using the £100 invested as its 'security'. I don't know the actual figures, but for the sake of argument let's say the bank can then lend £500. Various other people borrow that £500, and spend it, and now their customers plus Bob in total believe and act like they genuinely have £600. So, in effect, £500 has been created by the private bank. That's part of the reason why banks are usually keen for people to deposit their money with them: Every £ you deposit allows the bank to lend several £'s to other people.

I'm guessing that the argument for saying that the central bank is the one that really creates money would be based on pointing out that it's ultimately the central bank that makes the decisions on precisely how much money the private banks should be allowed to lend, in excess of their deposits.

 

[Barn]

I believe that's correct, but my understanding is that there's more than that: If Bob puts £100 in the bank, then the bank is not limited to lending the £100, but is in fact permitted to lend several times that amount, using the £100 invested as its 'security'. I don't know the actual figures, but for the sake of argument let's say the bank can then lend £500. Various other people borrow that £500, and spend it, and now their customers plus Bob in total believe and act like they genuinely have £600. So, in effect, £500 has been created by the private bank. That's part of the reason why banks are usually keen for people to deposit their money with them: Every £ you deposit allows the bank to lend several £'s to other people.

Correct. The name for this is fractional reserve banking.

 

[Steveman]

I too have no idea what the 83 are, but I wouldn't be taking bets AGAINST them being back on the table on 24th June.

They said on the tv last week that the EU parliament has held back on 70-80% of legislation recently which will all be bought forward as soon as the referendum is over.
The place is apparently just ticking over and is on hold for a deluge of legislation to be introduced after June 23rd.

 

[TheKnightWho]

I believe that's correct, but my understanding is that there's more than that: If Bob puts £100 in the bank, then the bank is not limited to lending the £100, but is in fact permitted to lend several times that amount, using the £100 invested as its 'security'. I don't know the actual figures, but for the sake of argument let's say the bank can then lend £500. Various other people borrow that £500, and spend it, and now their customers plus Bob in total believe and act like they genuinely have £600. So, in effect, £500 has been created by the private bank. That's part of the reason why banks are usually keen for people to deposit their money with them: Every £ you deposit allows the bank to lend several £'s to other people.

I'm guessing that the argument for saying that the central bank is the one that really creates money would be based on pointing out that it's ultimately the central bank that makes the decisions on precisely how much money the private banks should be allowed to lend, in excess of their deposits.

This is oversimplified. HSBC itself will borrow from other banks, and they will likely have other securities that they go on to sell to investment banks (such as mortgagees) as protection against credit defaults. The term fractional reserve banking leads to many times the original £100 moving around the economy temporarily (as in Paul Weaver's example).

What they can't do is just lend out 5 times what they own with nothing to back it, as your example seems to suggest. However, it is possible for their debts to exceed their liquidity (i.e. what they hold in hard cash or easy-to-sell assets) by many times, backed by debt they've bought. Indeed, investment banks doing this was one of the problems of the financial crisis: when Bear Stearns and Lehman Brothers owned debts worth 33 times as much as they owned in liquid assets, a 3% drop in the value of that debt (due to higher default rates on subprime mortgages) would wipe out all of its liquid assets to cover - effectively causing them to go bust. Because they had borrowed enormous sums of money to buy all of this debt (mostly mortgages) in the first place, when those mortgages defaulted and they ran out of liquid assets to cover, they had to default on their own debts to other investment banks and commercial banks - the ones who had sold them the mortgages in the first place. That caused the crisis to spread.

This is why there need to be credit limits on banks, to prevent this kind of exposure to drops in the market being possible.

 

[LateThanNever]

So you're happy to link things at me, but when I actually engage with economic terms you tell me that what I'm saying is old? Calling the names of the different kinds of money "old economics" betrays your total ignorance of the subject! You keep repeating the point that I have refuted multiple times; the Bank of England link is talking about different kinds of money: http://positivemoney.org/how-money-works/advanced/three-types-of-money/ and http://lexicon.ft.com/Term?term=m0,-m1,-m2,-m3,-m4 It's not a particularly difficult concept. What you seem to be espousing would lead to infinite inflation. Banks move money from savers to spenders; they do not create it, but they do have a multiplying effect on liquidity. That is where they "create" money, but when you trace back all the debt, all they've done is shifted spending power. That isn't to downplay the importance of that - it's what makes economies work - but you can't just say they create money in an effort to downplay my earlier point about investment.

You've also failed to make any kind of distinction between types of bank; the Bank of England link talks about central banks creating money for a start, not commercial ones.

I'm starting to think that I'm not the one who doesn't know what they're talkng about here.

A bank is a bank. I'm not espousing anything and I haven't noticed the infinite inflation! Banks create money out of thin air as the Bank of England and Prof Werner confirm. The BanK of England reports "the majority of money in the modern economy is created by commercial banks making loans", which could not be clearer. And that majority is 97%. The Bank of England prints the 3% remaining. Whether it's called M1,2,3 or 4 I've no idea.
No moving money from spenders to savers, just an accounting trick.
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What they can't do is just lend out 5 times what they own with nothing to back it,

Yes they can and did - where else did Barclays find the money to lend to its investors? When the Banks crashed their capital 'reserves' were between 1 & 3%. RBS turnover was larger than UK GDP!