Not the 70s

[GoSeigen]

If I had a penny for every time someone [usually anti-Labour] claims or warns that we're going back to the 70s I’d be a very wealthy man. This is a fatal error, one which caused many investors to miss out on the huge gains made by gilts after 2007, and caused the mistaken policy of austerity in both Greece and to a lesser extent in the UK. We hear the familiar refrain about Jeremy Corbyn: 'if he's elected, we're back to the 70s." Apparently.

For my part, I favour analogies with the thirties ( and posted frequently on this subject of TMF). Gilt yields and inflation trends are more reflective of pre-war conditions, along with a host of other macro-economic variables. Most people don't have a memory that long though, so they rather cling to the fear of the 70s, which most baby boomers remember quite clearly if they avoided certain substances! This short memory problem is compounded by what I call "The Last Time Fallacy".

Here's another great chart illustrating that we are far far from the 70s:



It comes from an interesting article about Capex on FTAlphaville:

https://ftalphaville.ft.com/2017/06/06/ ... nd-growth/

Readers will note that if it is correct that conditions match the thirties, we can expect a long rise in that chart hereafter, with fairly obvious consequences for investment -- especially if the 1970s Fallacy retains its popularity.


GS

[odysseus2000]

Two of the big differences with the 70's are that we now have no capacity constraints, thanks to Chinese manufacturing, and we have a lot more oil production so that the two drivers of 70's inflation are absent.

The election campaign fought by the conservatives seems to be heavily focused on fear about what Corbyn might do with illustration to the 70's and nothing on what May wants to do and given the election polls it isn't working well.

Equally strange there is no focus by Labour on the prosperity gains under Blair and instead a campaign about fairness with talk of re-nationalising various industries.

Elections are all about emotion and who can put out the most appealing "you will have cake" message.

No sure that a focus on the now long ago 1970's or trying to ridicule opponents with video bites helps much with the cake message or whether re-nationalising always as a lot of cake, unless folk believe that nationalised industries will charge less.

Dunno, its a negative, bland and uninspiring offering from all the parties, at least to me, and this makes it very difficult for me to believe polls or have a clue which way it is going to go. Markets seems confident of a May victory as they were of a Clinton one.

Regards,

[odysseus2000]

inv35t
The Labour taking us back to the 70's suggestions, are more a reference to Labours economic management history. First major economy having to be bailed out by the IMF was at a time when Labour were in government. Coincidental or not?

This is a recurrent theme that somehow the conservatives can manage better than labour. Personally I don't see any evidence for either party being good at things historically. Sure some have better times than others but this seems as much about luck in arriving at the right time.

Stanley Baldwin (c): Didn't stop the rise of the Nazi and that cost us a lot of money

Chamberlain(c):Ditto

war time Churchill (c): won the war via a coalition of the best politicians, then lost the next election very badly

Attlee (l) created the welfare state, nationalised lots, spent lots

Churchill (c): Didn't address failing UK economy

Eden (c) Suez, expensive!

Macmillan (c): Oversaw great boom, but could not keep it going

Alec Douglas-Home(c) Failed to address declining economy

Wilson(l):Inherited failing economy, devalued

Heath(c): Got us in to EEU, now costing a fortune to get out, beaten by miners

Wilson(l): IMF after £ collapses

Callaghan(l): UK strikebound

Thatcher(c): Sold of assets, broke the unions, turned economy around, won Falklands back, failed with poll tax, blessed with North Sea oil

Major(c) inherited Thatcher prosperity

Blair(l): lots of borrowing, huge rise in UK prosperity

Brown(l): Ditto, folk then fretted over debt

Cameron(c) lost Brexit referendum creating big spend

May(c) ?

Of course one can't sensibly consider a politicians achievements in a few lines, but that is how most voters look at things.

The argument that it is about party seems wild of reality at least to me.

More like luck/unluck of their time and political ability of PM is probably how folk should evaluate the choices. In some ways that seems to be what voters do, voting for who ever they have an emotional connection with the message and or the politician.

Regards,