Osborne talking ‘sheer nonsense’ about Cyprus

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”

  1. 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,.

  2. John Ruddy

    So if you have a mortgage greater than your salary, you should become homeless?

  3. 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.

  4. 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.

  5. 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.

  6. George Hallam

    “Print and spend and you get inflation.”

    only if the economy stays the same size. This will be the case if there is no spare capacity.
    Otherwise, government spending has a multiplier effect.
    This means that increased government spending will cause the economy to grow.
    Contrarywise, a cut government spending will cause the economy to shrink.

  7. George Hallam

    “State expenditute. Maybe. It’s not investing, its spending. ”
    That just depends on what the state spends its money on.

  8. LB

    Spending cuts? What cuts? Year after year,spending is up, and yet the economy shrinks.

    Explain why with increased spending, the economy is shrinking. Your theory is that the opposite happens.

    Now what’s happening?

    35% planned tax rises. Red book increases in taxation. That’s the reason.

    Take more money and screw the economy, Then use the symptom of taking money out of people’s pockets and making them poor to take more, borrow more and spend more, making the problem worse.

  9. Corrupt_B'stard

    OI!!! IMF!! a one-off windfall tax of 20% on the £4 trillion wealth of the richest 10% in this country, would pay off the nations debt at a stroke. Interested?

  10. Brian

    You’ve been listening to the clueless neo-liberal Mr. Osborne too much.

    Maggie Thatcher lied. There is no comparison between a household budget and a nation’s budget. A state with a fiat currency by definition can never be bankrupt – it can always pay bills in its own currency, unless it deliberately defaults.

    All UK government payments are made by money created out of thin air, just as the commercial banks do when they give you the money to buy your house. If you have a mortgage, do you think the cash used to buy the house came from savers? Do you think that the government can’t pay for anything unless it first collects taxes into some account?

    Learn something about Modern Monetary Theory.
    http://www.3spoken.co.uk/2011/01/how-governments-super-platinum-credit.html

    Don’t mention Zimbabwe or the Weimar Republic either:
    http://bilbo.economicoutlook.net/blog/?p=3773

  11. Newsbot9

    So basically you’re claiming that most poor people, many of whom spend well over a third on the inflated rent, are bankrupt. You want to force them to be homeless, fraud. You want to throw them onto the street – this is YOUR PLAN.

    And how dare taxation take away some of your millions for retirement!

  12. Newsbot9

    No, the depression is because of the deliberate suppression of demand by the government. Taxation on your rich is falling. Corporate welfare is soaring. This is your austerity, a cause of GDP shrinkage.

  13. Newsbot9

    Austerity denial. Triple dip denial.

    Keep claiming that this is caused by tax cuts for your rich, so they can send ever-more overseas. Keep claiming that the minor expense of tax for the poor, which returns far more to them, is “making things worse”. It’s stopping you ripping them off even more, which is your “problem”.

  14. Newsbot9

    No, he’s the sort of policy wonk who informs the Austerity Gospel of St. Osborne.

  15. LB

    Doesn’t work.

    Remember that the state pensions are linked to inflation.

    As fast as you print money, inflation goes up, and the debts go up.

    The state has promised more than GDP. That’s the issue. They have promised more (and taken far more).

  16. LB

    Nice try Newsbot.

    I’ll give you 1 / 10 for repeating what other people say.

  17. James

    Is the state bankrupt? Have we stopped paying creditors!

  18. LB

    There are two conditions for bankruptcy.

    1. Insufficient cashflow to pay on time
    2. Insufficient assets to cover liabilities and no foreseeable chance of a reversal.

    You need to apply both tests.

    So as to your question, have they stopped paying creditors in full, the answer is yes.

    Raising the state retirement age is a default. You get X years less payout. Just one example.

  19. Newsbot9

    And I give you 10/10 for ripping off the poor.

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