Lib dem question time Watch

hebe001
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#201
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#201
(Original post by Matthew_Lowson)
Regarding the Economy, and personally I would like an answer from both the leader and Treasury spokesman please, what would the Liberal Democrats do to stagnate deflation
Deflation is essentially the result of people waiting to buy certain goods because they think "well the prices are going down, if I wait a bit longer they might go down even further". And when they stop and wait, businesses lower their prices even more to try and get some customers. It's essentially a disastrous downward spiral.

The first thing that needs to be done to stop this spiral is to raise interest rates (though of course this can only be done by the independent Bank of England). This would raise the costs for businesses who would then have no choice but to stop lowering their prices or in some cases, they might even need to raise prices slightly. Once this price decrease stops or prices go up slightly, it would be evident to consumers that they aren't going to see the 'rock bottom bargain prices' they were hoping for. This would encourage them to spend immediately, and as a result of the increased demand we could see greater economic growth (and not to mention a rise in employment before that). Of course we then run the risk of inflation, but this issue is for the most part in the hands of the Bank of England's Monetary Policy Committee.

If deflation was proving to be quite a problem, one thing that we would consider is minimum price levels in order to stop prices falling any further. We must however bear in mind the sort of goods and services that will be affected by this. Consumers will always, no matter what, buy basic goods such as clothes, bread, milk, etc. The kind of goods/services that normally see fluctuating demand levels are luxury goods such as TVs, cars, etc. For example, if a brand new 40" HD TV was originally priced at £1000, but had seen its price fall to £800, then £600, and then £400, consumers would wait until it fell to £200 (or even lower) before deciding to buy it. If we put a minimum price level on this good of, say for example, £700, then consumers- knowing not to expect further price falls, or price rises for that matter- would buy it immediately. Now that's just an example. But as a result of more perceived bargains being available (bearing in mind that price levels had fallen), aggregate demand in the economy would have increased and, as one particular positive effect, this would consequently incentivise more business start-ups which would lead to increased employment and increased economic growth.
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hebe001
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#202
(Original post by Bagration)
I think a better question would be what would the Liberal Democrats do to keep both inflation and deflation at extremely low levels (i.e. 2%/-2%)
The question has a degree of inexact economic theory behind it. If, as is being suggested, inflation was kept at 2% and at the same time, deflation was kept at -2%, then the net change in overall price levels would be 0%. Although this would be the ideal situation for any government, if you look at historical economic trends, this is absolutely impossible in the long run.

I have mentioned in my previous post how I anticipate the problem of deflation to be dealt with. With regards to inflation, again this is mainly in the hands of the BoE's Monetary Policy Committee- and as the BoE is completely independent from the government, no political party can be held accountable here. What is certain though, is that if the BoE is having difficulties controlling a potentially runaway situation with inflation or deflation, we will pursue suitable measures to assist in keeping the problem under control.
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Gremlins
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#203
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#203
(Original post by hebe001)
Deflation is essentially the result of people waiting to buy certain goods because they think "well the prices are going down, if I wait a bit longer they might go down even further". And when they stop and wait, businesses lower their prices even more to try and get some customers. It's essentially a disastrous downward spiral.
Observation of how people actually buy stuff doesn't support this theory at all.

The first thing that needs to be done to stop this spiral is to raise interest rates (though of course this can only be done by the independent Bank of England). This would raise the costs for businesses who would then have no choice but to stop lowering their prices or in some cases, they might even need to raise prices slightly. Once this price decrease stops or prices go up slightly, it would be evident to consumers that they aren't going to see the 'rock bottom bargain prices' they were hoping for. This would encourage them to spend immediately, and as a result of the increased demand we could see greater economic growth (and not to mention a rise in employment before that). Of course we then run the risk of inflation, but this issue is for the most part in the hands of the Bank of England's Monetary Policy Committee.

If deflation was proving to be quite a problem, one thing that we would consider is minimum price levels in order to stop prices falling any further. We must however bear in mind the sort of goods and services that will be affected by this. Consumers will always, no matter what, buy basic goods such as clothes, bread, milk, etc. The kind of goods/services that normally see fluctuating demand levels are luxury goods such as TVs, cars, etc. For example, if a brand new 40" HD TV was originally priced at £1000, but had seen its price fall to £800, then £600, and then £400, consumers would wait until it fell to £200 (or even lower) before deciding to buy it. If we put a minimum price level on this good of, say for example, £700, then consumers- knowing not to expect further price falls, or price rises for that matter- would buy it immediately. Now that's just an example. But as a result of more perceived bargains being available (bearing in mind that price levels had fallen), aggregate demand in the economy would have increased and, as one particular positive effect, this would consequently incentivise more business start-ups which would lead to increased employment and increased economic growth.
So people are going broke and you want prices to go *up*? That's the biggest recipe for disaster imaginable: people don't have any savings (with most of them they're massively in debt already remember), so they'll just buy less if prices go up. Demand will just completely crash at the same time the gov't is trying to push prices higher. Hello, economic oblivion.
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Bagration
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#204
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#204
(Original post by hebe001)
The question has a degree of inexact economic theory behind it. If, as is being suggested, inflation was kept at 2% and at the same time, deflation was kept at -2%, then the net change in overall price levels would be 0%. Although this would be the ideal situation for any government, if you look at historical economic trends, this is absolutely impossible in the long run.

I have mentioned in my previous post how I anticipate the problem of deflation to be dealt with. With regards to inflation, again this is mainly in the hands of the BoE's Monetary Policy Committee- and as the BoE is completely independent from the government, no political party can be held accountable here. What is certain though, is that if the BoE is having difficulties controlling a potentially runaway situation with inflation or deflation, we will pursue suitable measures to assist in keeping the problem under control.
I didn't mean that - I meant that it should fluctuate between 2% inflation and 2% deflation, going no higher or lower in each respective category, not that it would be 2% inflation plus 2% deflation.
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hebe001
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#205
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#205
(Original post by Gremlins)
Observation of how people actually buy stuff doesn't support this theory at all.
Would you like to clarify what you mean by 'deflation'?

(Original post by Gremlins)
So people are going broke and you want prices to go *up*? That's the biggest recipe for disaster imaginable: people don't have any savings (with most of them they're massively in debt already remember), so they'll just buy less if prices go up. Demand will just completely crash at the same time the gov't is trying to push prices higher. Hello, economic oblivion.
You have to bear in mind that as prices for various goods/services go down, this will leave consumers with a greater disposable income. So if we place a minimum price level on certain luxury goods, consumers will still be able to buy these goods. Demand will not crash at all, especially considering that price levels will still be lower than before. I therefore reject any notion of 'economic oblivion'.
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hebe001
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#206
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(Original post by Bagration)
I didn't mean that - I meant that it should fluctuate between 2% inflation and 2% deflation, going no higher or lower in each respective category, not that it would be 2% inflation plus 2% deflation.
Well primarily this is something that the BoE's Monetary Policy Committee must deal with. If the rate fluctuates between -2% and 2%, then it isn't a huge problem for the government. Naturally, where concerned, we will seek an explanation from the Governor of the BoE of the steps he is taking to keep inflation/deflation under control. But if the problem looks like it will get out of hand, we will intervene with suitable measures.
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Podgeykins
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#207
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#207
(Original post by hebe001)
Would you like to clarify what you mean by 'deflation'?



You have to bear in mind that as prices for various goods/services go down, this will leave consumers with a greater disposable income. So if we place a minimum price level on certain luxury goods, consumers will still be able to buy these goods. Demand will not crash at all, especially considering that price levels will still be lower than before. I therefore reject any notion of 'economic oblivion'.
Considering many products have very diverse ranges and are constantly upgrading / improving products, how do you plan on regulating the minimum price?

I don't consider it a good idea myself, but it sounds interesting.
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hebe001
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#208
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#208
(Original post by Podgeykins)
Considering many products have very diverse ranges and are constantly upgrading / improving products, how do you plan on regulating the minimum price?

I don't consider it a good idea myself, but it sounds interesting.
We must remember that the minimum price levels proposal refers to luxury items only, not daily necessities.

With regards to how we will regulate this, for starters, as the minimum price proposal will effectively be a law until it is repealed, there will be strict punishments for retailers who sell at lower than the minimum price. This will disincentivise other retailers from doing the same.
Secondly, retailers will be subject to random checks of their financial accounts and sales statements. An independent auditor will go through the sales statement, ensure that none of the goods in question were sold below their minimum price, and this will be cross-referenced with the overall financial accounts to ensure accuracy.
Thirdly, sale of certain goods will have to be registered. For example, with TVs, in accordance with the Wireless Telegraphy Act 1967, TV dealers are required to inform TV Licensing (a group of companies who administer collection of the TV licence fee), within 28 days of each transaction, full details of the buyer or hirer and address of where the equipment will be used. For TVs and other such goods, the transactional details will be scrutinised to ensure that the law has not been broken.

These are just some ways to regulate the minimum price proposal- ideally we'd rather not be in a situation where we would need to pass this into law, but tough times call for tough measures and if we can stimulate the economy by causing minimal discomfort, then we will pursue the relevant measures.
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Podgeykins
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#209
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#209
(Original post by hebe001)
We must remember that the minimum price levels proposal refers to luxury items only, not daily necessities.

With regards to how we will regulate this, for starters, as the minimum price proposal will effectively be a law until it is repealed, there will be strict punishments for retailers who sell at lower than the minimum price. This will disincentivise other retailers from doing the same.
Secondly, retailers will be subject to random checks of their financial accounts and sales statements. An independent auditor will go through the sales statement, ensure that none of the goods in question were sold below their minimum price, and this will be cross-referenced with the overall financial accounts to ensure accuracy.
Thirdly, sale of certain goods will have to be registered. For example, with TVs, in accordance with the Wireless Telegraphy Act 1967, TV dealers are required to inform TV Licensing (a group of companies who administer collection of the TV licence fee), within 28 days of each transaction, full details of the buyer or hirer and address of where the equipment will be used. For TVs and other such goods, the transactional details will be scrutinised to ensure that the law has not been broken.

These are just some ways to regulate the minimum price proposal- ideally we'd rather not be in a situation where we would need to pass this into law, but tough times call for tough measures and if we can stimulate the economy by causing minimal discomfort, then we will pursue the relevant measures.
So if i'm reading this right, an independent audit needs to be set up, to audit thousands of shops across the UK on items that you classify as "luxury."

Take a car for example,

Is this luxury? Some people need it for work so it becomes a necessity.

Also, the variety of cars is so complex, it would take extensive regulating to ensure the prices are kept at a fair price and this in turn would damage the Car Industry, as people would just buy second-hand cars using these types of websites, http://www.usedcarsni.com/

This scheme would require tax-payers money to be funded, where is the money coming from to ensure that businesses are complying with the new law? It would indeed have to be an extentsive network of auditors.

So now put this on a wide-scale,

Laptops, Phones, Computers, Beds, Cupboards, Televisions, Gaming Consoles, Expensive Plates, Boxers, Fireplaces, Sofa's, Holidays, Musical Instruments, Tents, etc, etc, etc.

There is simply, too much to regulate. And if I must go further, this will significantly damage business competition, who compete to attract the customers.

This might work for alcohol in Scotland, but that's based on 1 particular item, not a vast-amount.
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TomGeorge
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#210
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#210
Wouldnt setting minimum prices be at a cost to the consumer. Why should in effect the consumer pay a premium to prop companies which is manufacturing good which do not meet the needs of market?
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Podgeykins
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#211
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#211
Also, it creates an incentive not to spend, that's why the Alcohol one was introduced...
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DayneD89
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#212
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#212
(Original post by Podgeykins)
Also, it creates an incentive not to spend, that's why the Alcohol one was introduced...
In fact (if minimum prices are monitered and ajusted) it creates an incentive to spend on luxury goods as if you wait and purchase in a year the price will have risen. In that way it would almost cause artificial inflation of two persent that could be lifted when the recession (dare i say depression) ends.
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Podgeykins
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#213
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(Original post by DayneD89)
In fact (if minimum prices are monitered and ajusted) it creates an incentive to spend on luxury goods as if you wait and purchase in a year the price will have risen. In that way it would almost cause artificial inflation of two persent that could be lifted when the recession (dare i say depression) ends.
http://news.bbc.co.uk/1/hi/uk/7944334.stm

The Liberal Democrats backed Sir Liam's stance and said putting an end to "pocket-money priced alcohol" would influence drinking behaviour.
This is because it's a deterrent, less they can buy the less drunk they will be able to get.

And in real terms, if I have to purchase a TV at a more expensive price, the less money I will be able to spend on my carpet or second-hand toliet roll, so infact affecting other businesses and their revenue.
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DayneD89
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#214
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#214
Yes, if it isnt monitered and ajusted to create inflation it could be a detterant. Alcohol is not the kind of thing you want to 'buy now before the price rises' though. It would create artificial inflation when applied to items you do not buy often, like a new pc or tv.
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Podgeykins
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#215
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But who is monitoring and adjusting it? An independent audit?

How big does this institution need to be? and how much will be used to fund it?

Regulating the housing market perhaps, but not every luxury good,

And at the same time, the housing market, was beyond itself and required deflation.
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DayneD89
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#216
Im not an economist. I am simply trying to explain hebes idea as best i can.

I would have to do some research to find cost. But for further explination you will have to wait for hebe.
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Podgeykins
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It's worrying that Hebe is taking leadership over the economic aspects.

You need to ensure that he is fully briefing you on any points made, but on the topic of Leadership how did the internal party election go?
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DayneD89
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#218
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#218
Hebe has my full confidence in economic matters. Now is not the time for me to try and pretend i am controling the tsr lib dem economic policy. With current economy matters it is time for me to allow someone who understands the economy to control the matter.
And I won in a good race. We now have a deputy leadership election underway.
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Podgeykins
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#219
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Who is leading this party?

You may have won the moral support of your party, but was hebe not in direct competition with you?

Perhaps it's time you allow someone to take control of the Liberal Party, who is capable of answering questions on all fronts, including the economy.

Current cabinet:

* hebe001 - spokesperson for economy
* bacondude - spokesperson for defence
* mrgd291190 - spokesperson for foreign affairs
* indeed - spokesperson for health
These are your spokesmen, but what exactly do you do in terms of leadership?
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DayneD89
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#220
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#220
Have you ever heard of delegated responsibility? Hebe, like every lib dem answers to me, but he has control over the economy. He has my full confidence. My role is making decisions and leading the party but i believe in having an honest transparent leadership. That way we can put forward an experts oppinion on all areas.
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