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5 reasons you should worry about Greece and the euro

(Update) The eurozone once again faces a full-blown crisis centred on Greece. What does it mean for people in the UK?

 

by Gavin Lumsden on May 21, 2012 at 09:03

5 reasons you should worry about Greece and the euro

The eurozone once again faces a full-blown crisis centred on Greece.

The chances of the country remaining in the euro club are no better than 50-50 following this month’s messy general election in which voters registered a protest against the austerity measures required to reduce Greece’s debts.

With the risks of financial chaos growing I look at how you could be affected.

1) Eurozone recession would hurt us

Greece may be small, representing just 3% of the eurozone economy, but it cannot simply drop out of the single currency without causing massive financial disruption.

The great fear is of a ‘disorderly’ euro exit but even if Greece withdraws after a period of preparation it will deal a shattering blow to Europe’s fragile banking system and economies. 

Banks that lent to Greece would have to write off all their debts if the country reverted to the drachma, not just most of them as they have previously done. Further weakened, they would lend even less to consumers and businesses, hitting economic growth.

There is also the danger of bank runs as people panic and withdraw money from institutions they think may be unsafe. There have been ominous signs of this already (see below).

In all probability the eurozone would suffer a deep recession, extending the UK’s own downturn as around half of our exports go over the Channel.

Last week the governor of the Bank of England said it was ‘inconceivable’ that a breakup of the euro would not hurt the UK as he slashed his growth forecasts for this country and said inflation would take longer to fall than he had hoped. Some feel King is still being too optimistic.

Robert Chote, chairman of the Office for Budget Responsibility, has warned that the crisis could push the UK into its second deep recession since the financial crisis, and that it 'may never recover' its lost growth.

2) Financial contagion and bank runs

The Greeks may be right to object to the decades of hardship they would endure repaying their country’s debts in full. But the alternative is hardly much better. The currency devaluation that would come with a switch to the drachma would give Greece a platform on which to rebuild its economy, but only at the cost of wiping out the savings of its population.

Worried savers have already pulled €1 billion out of Greek banks since the inconclusive election, which left the country temporarily in the hands of an unelected judge.

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64 comments so far. Why not have your say?

Martyn

May 18, 2012 at 20:15

Point 5 would not apply if the UK is deemed by the markets to be a safe haven in Europe. If, if, if!

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andy jam via mobile

May 19, 2012 at 09:08

Point 5 is the biggest load of drivel I've read on this whole mess for some time.

As has been proven by the US and Japan, QE is not inflationary because it does very little to alter money supply in the real economy. Why do people chose to compare it with Germany 70 years ago when what they did was very different, rather than with Japan just 10 or so years ago when "money printing" approach was exactly thr same and has had 10 years to show its inflationary effects which have still failed to materialise?

Go and read up your Richard Koo on balance sheet recessions and stop writing economically illiterate rubbish.

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Harry Brooks

May 19, 2012 at 09:10

Oy vey gevalt!

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Murdo McSponge

May 19, 2012 at 09:12

The lunatics are in charge of the asylum and the only certainty is that the politicians will do whatever they need to do to get reelected; whether or not that is good for the people is completely irrelevant to them.

They will also do whatever is necessary to preserve their power. That is why it is very unlikely they will agree on a single fiscal and political union run from Brussels. If one was formed, the Presidents of France and the Chancellors of Germany would become irrelevant. It won't happen!

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andy jam via mobile

May 19, 2012 at 09:33

Has it occurred to you Murdo that what they will have to do to get re-elected might be good foe the people? The people want an alternative to punative austerity because it is slowly destroying their economies. They are right. We only better hope that they start doing what they news to do to get re-elected and that is come up with an alternative to what they've come up with to date.

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Mr Grumpy

May 19, 2012 at 09:44

Wow!!!

So the miniscule Greek 3% of the eurozone economy is shafting the entire globe.

What a brilliant idea "Europe" was, and with all this catastrophe around us the Brussels gravy train is demanding an increase in it's budget!!!

HEELP!! - I'm confused (and most definitely ANGRY)

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William Bishop

May 19, 2012 at 10:07

Andy Jam is probably right for the time being about QE not being inflationary. It could be different if banks were to use their additional reserves to increase lending, and businesses became more willing to borrow to invest, but this does not seem likely in the absence of a much higher level of confidence in growth.

More generally, it is easy at times of great uncertainty to produce doom-laden commentary by throwing in every conceivable negative factor. More often such an adverse view prefigures a period of opportunity, although the timing may be unclear. (It does not, for instance, even seem likely that banks would have to write off 100% of Greek loans if Greece substituted a new drachma for the euro, since the latter would still carry some value).

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Murdo McSponge

May 19, 2012 at 10:53

Andy Jam. Of course they will vote for anti-austerity measures - they're popular everywhere except Germany, which is why the beautiful Chancellor of Germany doesn't want them. Whether anti-austerity measures are right, or just storing up more problems for the future, I don’t know. But it just proves my point; the pols will do whatever they think will get them back into power. Sometimes what they do will be good, it’s bound to be!

But we've got into this whole mess because of the way democracy is working at the moment. Democracy is all about the pursuit of power and the economy is one huge leaver to pull to get into/stay in power.

Economics, as a lever of power, has to be all about growth. Growth is a two wheeled bicycle that will have to be pedalled forever, or we’ll all fall off. The challenge is for mankind to find a way of pedalling more slowly without falling off. Reaching that nirvana is currently beyond the ability of democracy, because to get to it means cutting back on electorates’ expectations, and that is something the pols can’t sell and get re-elected at the same time. Of course, democracy’s still the best system we have, but “it ‘ain’t working very well at the moment!” Look at the state of Democracy in the USA!

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alan thorburn

May 19, 2012 at 10:58

Deja vu, all over again !

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Austen Brown

May 19, 2012 at 11:11

20 years of over consumption

National credit card maxed out.

Of course there have to be cutbacks to what can be afforded.

Growth was stimulated by an overgeared banking system and is no longer affordable.

Protect deposits in a good bank and cut the rest free to sink or swim. Then 'normality' will return.

Why do politicians persist in trying to preserve the excesses of the banking system with taxpayers (our) money?. Any oither business would default.

Readers may like to watch this interesting and clever little clip from a young lady called Victoria Grant:

http://www.youtube.com/watch?v=Bx5Sc3vWefE&feature=youtube_gdata_player

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Georoy

May 19, 2012 at 11:12

I'll say it again, could somebody explain, once the deficits are gone and all the debt has been paid off were will the money come from it will all be gone, don't get all this at all.

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Altogether now

May 19, 2012 at 11:18

With all these currencies going to pot is now the time to go and salt away a few gold sovereigns?

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Austen Brown

May 19, 2012 at 11:59

Georoy

An interesting observation from you.

QE is used by the Bank of England (a government subsutiary) to purchase the governments own bonds / stock from the market.

'The market' in this case is the bankers and other large financial institutions and those who have their wealth invested therein.

As my father formerly quoted " The rich get richer and the poor get children".

Not much changes.

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Austen Brown

May 19, 2012 at 12:01

Sorry typo should read 'subsidiary'

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William Krause

May 19, 2012 at 12:02

Nice to see some MMT understanding from William Bishop and Andy Jam! Public deficits are necessary to spend money into the economy when the private sector is net saving - i.e., consumers are paying down debt and spending less so business respond by cutting staff and curtailing investment spending which leads to higher unemployment and a lowering of tax receipts which in turn leads to recession and a higher public deficit. The answer to demand deficiency in the private sector is intelligent public spending to rebuild the physical and intellectul infrastructure of the country whilst injecting much needed demand spending into the economy which is the only way to restore business confidence. Of course Georgie boy is doing the exact opposite guaranteeing yrs of misery to come for millions of Brits.

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Anonymous 1 needed this 'off the record'

May 19, 2012 at 12:39

Can anyone advise- 'in a worst case scenario customers would have up to £85,000 of their savings protected by the Financial Services Compensation Scheme.' Is this guaranteed per customer or per account and does it apply to business accounts. i have a number of accounts (personal and business) with Santander and the total invested is more than £85k though there is no more than £85k in each account. Do I need to move some of it to other banks for this security?

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Ed the 5th

May 19, 2012 at 12:47

Can someone explain to me, simply & without sarcasm, why, if Greece leaves the EU & reverts to the drachma, all the institutions & countries who have lent money to Greece, would have to write off their debts?

Why wouldn't repayments continue, whatever Greece's political & financial situation is? (Unless, of course, it was completely & utterly100% bankrupt)

Does it matter if repayments are in euros or drachmas?

If I was owed money, I wouldn't mind too much what currency it was repaid in - as long as I eventually received the original value of what I lent, together with the agreed interest.

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Georoy

May 19, 2012 at 14:11

Yes but, at the moment paying down the debt is costing me extra on VAT, fuel, drink, everything and it's hardly made a dent if we pay it all down I'll have nothing left AND who get all my money that's being used to pay down this debt?

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william Westlake

May 19, 2012 at 14:21

Anonymous 1 my understanding is that each investor gets 85K per institution. Joint accounts get double. If a bank has subsidiaries, its still only 85K for the whole lot.

Ed the 5th, my understanding is that Greece would only leave the Euro if it were to default on it's debt - otherwise there's no point in leaving.

If the Greeks do default and start up a debt free Drachma with a clean slate I can't imagine anyone wanting to lend them any money in which case austerity would be forced upon them anyway.

The Greeks are behaving like spoilt children at a party who think that the more they disrupt the party the more birthday cake they'll get. I suspect that they're heading for quite a spanked bottom.

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John Thorley

May 19, 2012 at 16:09

Well here's my take on things:

Greece leaving the Euro is a certainty, get used to it. The sooner the investors, politicians, economists etc can take this on board the better. We need to shout it from the roof tops GREECE IS BUST you will NOT get any money she owes you, now stop crying about it. We are not all going to die because of this! The factories across the world can still continue to make the stuff we need but ONLY if you WANT them to and show some bloody backbone and some confidence!

By the way, the whole sorry affair is made much worse by the fact that the people at the top of institutions like the IMF and World Bank (The very institutions that are to act as lender of last resort to the world) are the same people who presided over the formation of this mess and were the economists who set up the common currency in the first place. They are thus more concerned with savng the currency than the people who use it!

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Harry Brooks

May 19, 2012 at 16:38

Don't forget that 'the people who presided over the formation of this mess' will not have their incomes damaged or lose their jobs, homes or pensions. To them it's just an ideological experiment that seems to have gone wrong...oh well... on to the next...

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an elder one

May 19, 2012 at 21:11

PIIGS might fly!

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William Bishop

May 20, 2012 at 10:20

Reverting to one of my original points in response to Ed the 5th, if loans originally made in euros were to be repaid in substantially devalued drachmas, there would be losses to the lenders. However, these would not be 100%, and might also be mitigated by such loans already having been written down in the lenders' books. Even in the case of a very messy and politically driven default like Argentina's, losses generally were not 100%.

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Chris Adams

May 20, 2012 at 14:25

As someone who prefers to take the contrarian view to mass market hysteria to impending doom and gloom bordering on perceived Armageddon ,the stock market Bears ( who I have natural affinity with ) appear to have got too far ahead of the curve.Remember the millenium bug created neurosis and fear that made alot of people/companies wealthy 'fixing' - and for what outcome ? sterling and London property prices have risen on the back of the Arab Spring and Eurozone Crisis and these huge inflows of funds are now domiciled here and not about to leave these shores anytime soon - good business if you can get it.In the past 20 years Iceland, Argentina, Russia and South Korea have defaulted on their Sovereign debt and within two years their economies were rebounding strongly.Greece will suffer pain in the short-term whether in or out of the Euro. However, within a few short years with a devalued drachma it too should rebound. Not the kind of advertisement the germans want broadcast to other weak members within the eurozone. And before the 'market' takes the view that nobody will want to lend to Greece if it defaults I suggest those same people look east to China. .Greek shipping and (what will become a cheap european labour market )may hold huge attractions. As with war- buy the market on the sound of the first bullet.

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chris wood

May 20, 2012 at 18:48

all this is the result of ditching the gold standard. lets all get back to the promise to pay the bearer on demand the sum of one pound, drachma or franc. who on earth agreed to using the word of of soveriegn nation or brussels gravy train over something you could actually hold in your hand. of course it will be abused. only an idiot would think otherwise. these nations had a donkey and a sunhat between them until someone came along and said spend away on the basis of a politicians promise to pay the debt eventually. if anyone but goverment had done such a thing they would be locked up for fraud.perhaps it was a communist ploy to improve the lot of the southern european donkey jockey at the expense of the investing classes. if so its working.

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John Thorley

May 21, 2012 at 00:41

Once upon a time there was a little man made from feta cheese. Mr Feta Cheese and his friends, Mr Paella, Mr Pizza Face and a little green Irish pixie liked to sit on the river bank and enjoy the sunshine.They weren't very industrious but they were very happy.

Then one day Herr Fox came by. Herr Fox was very strong and competitive and liked to be in control. He had picked a fight on two occassions in the past with a bull dog, but he didn't talk about this much as he had lost both fights!

'Have you ever wondered what it might be like to swim across the river?' Asked Herr Fox. 'Well now' Replied Feta Cheese, 'we did consider it once but there's no way we would be able to cross the river would we?'

'Ofcourse you can. Join with me, jump on my back' said Herr Fox 'I'm strong and can swim across the river'

They all did as Herr Fox said and jumped on his back. For a while all was well and Mr Feta, Mr Paella, Mr Pizza Face and the little Irish Pixie all enjoyed riding on Herr Fox's back as he swam across the river. Then, when they were about half way across, Herr Fox said 'Right what are you all going to do for me now?' Mr Feta and all hs friends got very scared and told Herr Fox there wasn't much they were good at. Herr Fox got very annoyed and threw them all off his back and into the river. 'You swim for me now!' He demanded.

Poor Mr Feta's little stubby arms were usless in the deep river. 'Oh gosh, I'm in too deep!' He yelled. All his little friends started to drown too! Herr Fox was outraged at how poor they were at surviving in the river and with a few large snaps of his sharp teeth he ate them all up.

Herr Fox swam back to the river bank but he started to feel very sick after eating up all the little friends. On the bank he threw up and out came a very chewed up Mr Feta, Mr Paella, Mr Pizza Face and the little Irish pixie. Herr Fox and the little friends all survived but they were all very poorly for quite a while afterwards!

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Harry Brooks

May 21, 2012 at 09:05

John Thorley — yes and, perhaps more pertinently, there is the story of the scorpion who needed to cross the river, and asked the frog to carry him. "Oh, no," said the frog, "you'll sting me to death." 'Don't be silly," said the scorpion. "If I do that, we'll both drown." So the frog carried the scorpion and, halfway across, the scorpion did sting the frog. With its dying breath, the frog said: "why did you do that? Now we're both finished." "I know," said the scorpion. "But it's my character."

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William Krause

May 21, 2012 at 09:27

Chris Wood - you think gold, a scarce metal of precious little practical value, has more backing it up than the working output of a sovereign nation? We have to go back to first understandings. Money is but an abstract representation of all the productive relationships in economic society. Instead of reifying money we should turn our focus to the reality of inequitable relationships in society and seek to fix those.

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Georoy

May 21, 2012 at 10:05

When I go to my supermarket I can buy "Greek" style cheese made in Denmark If we are going to resolve the problem we must buy Greek cheese made in Greece, and Germany needs to stop its aggressive exporting we should make our own beer problem solved.

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Philmo

May 21, 2012 at 11:06

Ed the 5th

Totally agree!

If all those debts have to be written off then there's a shedload of negligent lawyers/politicians involved, writing contracts as leaky as collanders!

The greedy bergers need suing!

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Ian Ray

May 21, 2012 at 11:13

I think Michael Portillo's recent TV programme was very revealing. He interviewed people from many walks of life in both Greece and Germany, "offering" the Greeks the choice between euro and drachma, and the Germans the choice between euro and deutschmark. Almost to a man, everyone plumped for the euro. It left the ex cabinet minister looking rather out of touch. I think in this country we underestimate our neighbours' commitment to their common currency. Head-on-block time: Greece will stay in the euro; the UK will join by 2025.

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chris wood

May 21, 2012 at 15:12

william krause in theory you are correct in the same way as in theory socialism is a better way to run our world. however put either of these high ideals into the hands of mankind and they are manipulated for individual /corporate gain. the system must be simple stupid to avoid being abused.what could be simpler than you can only print as much as you can back up with something be it salt .gold or magic beans.

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Jn

May 21, 2012 at 15:23

I must confess that it is very scary. No one said anything about China. Little by little they are reducing their expected GDP. Their banks lent a lot to the property market which could be a black hole. What happens to all those companies with big exposure to China.

As for the Greeks, if they do not pay their debts, who will lend them again and what will they do.

I fear the next few years would be very demanding whatever happens.

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William Krause

May 21, 2012 at 15:44

Chris Wood check this out: http://bilbo.economicoutlook.net/blog/?p=19495#more-19495

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Ian Craig

May 21, 2012 at 16:41

3%? It's a storm in a tea-cup.

Do not lend/give/loan-guarantee (synonymous, in Greek terms?) any more money to Greece, or their dozy/greedy creditors.

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Drake

May 21, 2012 at 16:44

But Citywire says we are not to panic. Who are we to believe, Grandma? Oh dear, oh dear.

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Paul Doran

May 21, 2012 at 17:12

Eurozone! Euro! EU! Nice ideas.

How was it ever going to work when all these nations can't even agree on a plug?????

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gggggg hjhjkl;'

May 21, 2012 at 18:09

The sooner the Greeks default, the better for us all. They can get on with soughting their own mess out and the rest of us can move on.

Portugal and Spain next I wonder?

The press just love this, what will they do next for sensationalism I wonder.

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gggggg hjhjkl;'

May 21, 2012 at 18:16

As an after thought I think I am pretty close to stopping reading or listerning to anything the media has to say about this subject. I think most of what I here is a repeat of what has been said many, many times before.

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Harry Brooks

May 21, 2012 at 18:44

ggggg hjhjkl;' — you mean 'have to say'. The word 'media' is a plural.

Also, Andy Jam — 'punative, should be 'punitive'.

And, Mr.Grumpy — 'miniscule, should be spelt 'minuscule'.

And so on....

Not only do the writers here here have little to contribute save prejudice, they have questionable grammar and spelling skills — or they just don't care, which is a common adjunct to sloppy thinking.

I've just remembered why I stopped reading these pages. I'm going to stop again now. But, first, can I ask everyone to consider, even if just for a moment between their gins, tonics and moans, what it must be like every day for the hopeless people on the streets of Greece and Spain — and especially the young — who have no prospect of work or a dignified life?

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an elder one

May 21, 2012 at 18:47

pompous twit!

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Atheist

May 21, 2012 at 18:51

Here we go, the" Prophets of Doom" are at it again.

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Atheist

May 21, 2012 at 18:55

One wonders what type of pillow Harry Brooks rests his head on at night.

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Philmo

May 21, 2012 at 19:13

Probably "duck" down!

Sounds like a retired head of English department!

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Drake

May 21, 2012 at 19:57

Leave the ducks to me please Philmo.

And I suspect Mr B. never got promoted to HoD.

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Philmo

May 21, 2012 at 22:32

My pleasure - and yours, I suspect!

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Harry Brooks

May 21, 2012 at 22:49

Philmo, Drake, Atheist, Elder One — all wrong.

H.Brooks' CV in brief: self-employed for 43 years, started in a spare bedroom, ultimately created five companies, was group chairman, provided employment for a number, now more or less retired. Did graduate in Law (sorry, correction, Honour School of Jurisprudence) at Oxford so,yes, some academic credentials. And not so craven as to hide behind a puerile alias.

Now, goodbye.

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an elder one

May 21, 2012 at 23:54

Come down off your plinth chap, vertigo could be your undoing.

A name, real or alias is simply a tag for the purpose of reference in this domain; both are of equal relevance in that context.

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C Reed

May 22, 2012 at 00:31

I don't worry about the Greeks and the Euro.

I worry that Euro politicians cant find their arse, even when using both hands.

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Drake

May 22, 2012 at 09:15

The Greeks have been let down by their rapacious and uncaring governing elite. It's a shame they don't know a little more about their own history.

Just to pick up on Harry's point about anonymity, I rather disagree. I use my tag because it's fun and recognisable. I view it as a kind of alternative identity (like George Eliot). I don't need to show off my name, although when I say that Drake derives from my initials DRK there are a lot of lawyers out there who will recognise me. I can also tell you, without being accused of showing off, that I read law at Cambridge (only kid from my school), probably about the same time that Harry was at the other place. When you write under a pseudonym you have to have something interesting to say if you want people to read it, unlike some twittering celebs who rely on their names.

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Ed the 5th

May 22, 2012 at 14:20

Now we have obvious examples of the reason I asked, in a post 3 days ago, for any replies to be simple & to contain no sarcasm.

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an elder one

May 22, 2012 at 15:23

Incidently, I think the word media, as used herein is a collective noun, a colloquial singular concept embracing an unspecific plurality of agencies.

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Harry Brooks

May 22, 2012 at 16:24

Don't you mean 'incidentally'?

If you're going to try to be clever, do get it right.

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an elder one

May 22, 2012 at 18:41

Admittedly 'incidently' is now obsolete, though it meant the same thing long ago, personally I find the present spelling pedantic but one can't fight progress. Incidentally (if it pleases you) I thought you'd gone away for good; and before you too try to be clever, bear in mind typos and other distortions do occur in these exchanges; it's the thoughts not the spellings that matter..

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Atheist

May 22, 2012 at 18:55

an elder one 10 out of 10 again.Well done.

These clever? ones do make themselves look rather juvenile at times do they not?

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Harry Brooks

May 22, 2012 at 19:22

Yes, well, I am leaving now, and the main reason — as I tried to say earlier — is that the quality of the exchanges in this forum is hardly better than the quality of the grammar, spelling, syntax and typing. There really and truly is a depressing range of ire, ill-informed opinion and raw prejudice on display here.

I returned in hope but that hope has been dashed.

Still, if churning out their views on this page helps people feel better by getting something off their chests, I suppose it serves a purpose. I wish them well.

Goodbye to all my readers...

P.S. Your liberal attitude that 'it's the thoughts not the spellings that matter' has

been at the heart of the decline in this country's education since the

1950s. Back then, some 3-5% of school leavers went on to University;

today, I believe it's 25/26%. Would you say that this is because

educational standards have risen up to 8-fold since then? Or would you

say that perhaps, entry requirements have been adjusted?...

Before you attack me on this — and also because I'm not going to return to

reply — let me say now that I am not just spouting uninformed prejudice. I

am personally acquainted with one of the country's leading educationalists

and he assured me recently that standards of teaching and education here

have been falling, in fact, since the 1920s, not just since the 1950s.

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Atheist

May 22, 2012 at 21:42

Goodbye Harry

You will indeed be missed

You probably had not noticed but all things have been changing for thousands of years even language and progress good and bad continues.

Finally I do so like your first paragraph of your last effort to educate us poor masses, especially the last sentence (There really and truly is a depressing range of ire, ill founded prejudice on display here) It so applies to you.

Farewell.

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an elder one

May 22, 2012 at 21:58

Oh dear, dear, Harry you know, I feel quite sorry for you having to carry that huge chip on your shoulder; why the constantly implied name dropping? there is no need for it, argument must be taken at face value.

Of course educational standards have deteriorated, but excellence of spelling is not a major factor; some of the most able engineers I've met didn't spell or express themselves too well, but they were well versed in science and technology, both factually and intuitively. Those are the people who create stuff are productive and improve our standards of living thereby; the educationalists have let us down, I think, by allowing that field in all its aspects to become diminished. Science and technology are hard subjects and lowering educational standards to satisfy the masses with easy degrees to bolster self esteem has been instrumental.

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John Thorley

May 23, 2012 at 03:03

Harry.. if people were so much better educated back in the twenties or thirties or whenever why did they not build Concorde, the internet, mobile phones, Nasa's Space shuttle etc etc back then? Why did they wait? Why is it that the things we build now are more technologically advanced than at any time in history if we are all more stupid?

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John Thorley

May 23, 2012 at 03:03

Harry.. if people were so much better educated back in the twenties or thirties or whenever why did they not build Concorde, the internet, mobile phones, Nasa's Space shuttle etc etc back then? Why did they wait? Why is it that the things we build now are more technologically advanced than at any time in history if we are all more stupid?

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John Thorley

May 23, 2012 at 03:22

Ha ha, stupid computer posted twice, darn things never work!

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Philmo

May 23, 2012 at 07:44

JT

Because it takes time to do research and develop the skills/techniques necessary to manufacture the modern materials and components which make up our leading edge products. It also takes money, ie is to some extent demand driven.

Each generation builds on the developed knowledge skills of the previous.

There's no doubt whatso-ever that a "backs-to-the-wall" situation eg a world war, accelerates the process.

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John Thorley

May 23, 2012 at 12:17

Getting back to Europe and European economies we really have to concede that it will be some time before we can enjoy growth and the associated riches.

Christine Legarde (head of the IMF) has said we must continue to tackle the deficit but that a more expansionist approach should be taken to create jobs and growth. She suggests reducing the VAT rate and more quantitative easing. This is both paradoxical and ridiculous. With business and consumer confidence at such a low ebb attempts at government induced expansion will push the whole economy into a very damaging inflationary spiral, creating mass unemployment and sending the value of the pound through the floor and taking everyone's savings with it!

She also suggested reducing the base rate. Talk about grasping at straws! It's at 0.5% and has been since March 2009. What does she want us to do? Pay people to take out loans?

Governments cannot stimulate growth during recessions, they are powerless in this regard. The US spent millions of dollars on infrastructure projects in the 30's and the depression continued unabated. Our government printed money in the 70's and it eventually caused Jimmy Callaghan to almost run out of Downing Street.

Mr Keynes you are wrong! He sited in his book that the forced expenditure of governments during WW2 ended the depression. I have a very different theory. It was the adjustment of the public perception caused by WW2 that ended the depression. There's nothing like a threat to your life or the loss of loved ones to make you spend a bit of brass enjoying yourself.

Back to today's problems and I just want the governments to steady the ship as it were. As a punter/voter I'll accept minimal growth I just want to avoid disaster and years of huge amounts of unemployment.

I can't help feeling, though, that it is people like Christine Lagarde that are more part of the problem than the cure! She has more vested interest in saving the Euro than saving the poor people forced to use it. She was instrumental in it's inception. She is wholly inappropriate to be head of the IMF with this back ground and not above scandal and miss direction of public money her self.

I know nobody of any influence, I'm just a lorry driver for Fowler Welch Coolchain, so I have minimal effect on anyones life but all I ask is that these people in positions of power and authority, whose every decision has a profound economic effect on my life and that of my wfe and children, make policy decisions with objective, unbiased and logical forethought.

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Rose G

May 23, 2012 at 15:54

I have to admit that some of the posters here speaketh the truth - John Thorley on his views on the IMF/World bank - I completely agree - they are heads of organisations who rely (like bankers) on countries/people needing to borrow money. I won't write her off but her predecessor was not up to much but chasing skirts from all accounts!

As per Chris Adams, it is true that there was a huge hulabaloo about the millenium bug, costing companies huge amounts of money on something that did not happen. I think that the media are no longer to be fully trusted - their only interest is to create a fuss so that someone will take notice - sad really!

It appears to me that they will repeat rumours as long as they can have a headline - whether or not it is true or not has very little bearing on what appears on our news.

If we are to examine the morals of those who peddle news, I wonder how surprised we would be to hear that they are only doing it because it earns them a wage - the likes of Rebecca Brooks who befried people like the Camerons - was the relationship there before he took up his position in Downing Street or did his premiership attract her/her newspapers attention?

The phone hacking stories, which are being investigated at cost to the taxpayers, will just be another whitewash - it would have created a big name for Leveson, & his cronies, but will it actually achieve anything tangible - ie reporters, owners of newpapers (Murdochs) be sent to prison?

If I as an ordinary individual were to carry out any form of hacking, which is illegal, would I not be sent to prison? There is one rule for those with no money/power, & the media fully subscribe to this.

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