George Osborne has been humiliatingly been accused of talking "sheer nonsense" by U.S. business and technology news website Business Insider, after Osborne cited the crisis in the Cypriot banking system as an example of why Britain must continue the "painstaking work" of austerity.
Oh dear.
George Osborne has been humiliatingly accused of talking “sheer nonsense” by U.S. business and technology news website Business Insider, after Osborne cited the crisis in the Cypriot banking system as an example of why Britain must continue the “painstaking work” of austerity.
Cyprus is set to receive 10 billion euros to stave off bankruptcy but the island’s savers are being forced to pay up to 10 per cent of their deposits to raise another six billion.
“That is an example in Cyprus of what happens if you don’t show the world that you can pay your way.
“I mean that is why in Britain we’ve got to retain the confidence of world markets,” Osborne said.
Business Insider deputy editor Joe Weisenthal responded by branding Osborne’s words “sheer nonsense“:
This is sheer nonsense. This has nothing to do with whether the country could “show the world that you can pay your own way.” It has to do with the fact that the Cypriot banks had large exposure to Greek debt (because of how intertwined their economies are) and took big losses on Greek debt writedowns. And it has to do with the screwed-up Euro system, whereby no country has their own currency.
And it has to do with having an oversized banking system, and all kinds of other things. There are virtually no applicable lessons to the UK here. But the government is using the incident as another excuse to justify disastrous policy.
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19 Responses to “Osborne talking ‘sheer nonsense’ about Cyprus”
LB
It’s got everything to do with the UK.
The state is bankrupt in the UK. It has 7,000 bn plus of debts when you include pensions, PFI etc.
That can’t be paid on taxes of 550 bn and spending of 7,000.
So what’s the solution going to be? Well more accurately what’s a desperate government going to do?
It will take the Cyprus option. Eg. Lets raid bank accounts. Just like a wealth tax on property,. 2 million, then 1 million, then 200K,.
John Ruddy
So if you have a mortgage greater than your salary, you should become homeless?
LB
Of course not.
However, if you’ve a mortgage of 14 times your income, and you are committed to spend 30% more than your income, you’re bankrupt.
If you carry on taking money from people promising to pay under those circumstances, you’re committing fraud.
If you present a false set of books that says you’ve got less than 2 times yours, (and some other persons), income in debt, you’re also committing fraud.
So where you’re analogy is correct, when it comes to going bankrupt in this way, you’re dependents are on the street – destitute.
it’s what’s going to happen in the UK and its because people like you are going around saying there’s no debt problem, we can carry on with the spend spend spend.
After all, its people’s retirement money you’re spending.
George Hallam
“if you’ve a mortgage of 14 times your income, and you are committed to spend 30% more than your income, you’re bankrupt.”
This is true for a person or an individual household. But only if they have no prospect of either increasing their income or reducing their expenditure. Typically, it is difficult to increse income at will. Further, an individual household’s expenditure has no measurable effect on the national economy and so income and expenditure are independent.
States are in a different position because:
a) a state can increase it’s income at will.
b) state expenditure has a significant effect on the national economy. This means that a state’s income and expenditure are not independent.
LB
a) a state can increase it’s income at will.
No it can’t.
Now if you mean the state can take the Robert Mugabe route, then there is still a problem.
Print and spend and you get inflation. Ho hum, the debts are inflation linked. As fast as you print, your debts also escalate.
b. State expenditute. Maybe. It’s not investing, its spending. However, taxes equally have a negative effect.
Since increases in taxes are huge, and spending cuts? Well there aren’t any. Spending is up year after year after year.
Hence a recssion.