Sometimes it is a good idea to see the big picture. For many years now the west apart from Germany has decided to live beyond its means. It has imported its lifestyle from China and other emerging markets, and borrowed money to sustain the spending. More recently a collapse of private sector bank credit and a squeeze on real incomes has started to adjust the way individuals borrow too much. Instead governments have taken up the task of spending and borrowing way beyond the tax capacity of the country concerned. In the case of the more extreme countries, they have been borrowing 10% of national income for extra state spending. This entails borrowing at least one pound in every five spent in the public sector.
Certain European countries decided to bind themselves into a currency union with Germany. Germany kept her costs down, and exported large quantities of manufactured goods to the weaker states in the zone. They ran up large borrowings to buy the goods, inflated their house prices, and spent too much in their public sectors. These countries cannot devalue to get into a more competitive position. They now want Germany to grant and lend them the money to carry on spending. Germany is reluctant to do so.
The US and the UK printed money to keep interest rates down, and allowed their currencies to devalue, to help price themselves back into world markets.
The Euro area is running out of opportunity to sustain the high levels of spending and borrowing. Money lenders are saying to several countries in the zone they are no longer willing to lend at an affordable rate, or at all. The EU and the IMF impose substantial cuts on public spending. The banks are weakened by the losses on the government bonds. They find it difficult to finance a private sector recovery. The more the economies decline, the less tax revenue there is, and the bigger the deficit.
What passes for political debate is usually about tackling symptoms, or seeking to delay the inevitable. Continental politicians hope that China and Brazil will come to their aid and bail out problem countries, or anticipate the IMF arriving with cash infusions for Italy on top of the three countries it is already supporting. If markets fall they seek to prevent shorting, only to discover the market still falls as owners sell. They shuffle governments around, hoping that markets will be impressed if a new team comes in to supervise the old policy.
The truth is markets will only calm down and refinance states at affordable rates again if governments not only say they intend to live within their means for a bit, but manage to do so. The public sectors of the overborrowed states need to do less, and do it better. A lot could be achieved by applying good management techniques to tasks in hand. I know of few public sector activities where it would be impossible to reduce the cost by 10% without damaging the service. The public sector does have to raise pension ages and change future pension entitlements. It does have to cut out less desirable activities and delay some desirable projects.
Savers and investors in markets do not believe the European states are going to transform themselves quickly enough and cut their demands for cash. Until they do so, the crisis remains. There is no choice between cutting public spending and getting growth going. Controlling public spending is a necessary but not a sufficient condition for growth. China does not have to lend us the money to buy her goods and live beyond our means. She can turn to making more goods for her own population. The West has to do better at paying its way in the world, and has to learn to live more within its means.
November 11, 2011
“I know of few public sector activities where it would be impossible to reduce the cost by 10% without damaging the service.”
Only because the way provision and funding is structured. That structure has to be addressed more quickly and robustly if those public services are to be retained that give a quantity and quality that is acceptable. If the structure remains as it is then as the government eventually meets its tax and borrowing limits which it already has even surpassing them then the consequences for public services is going to be dire as money available for them dries up. As they stand our public services and welfare systems are a drag on the nations economy and are partly responsible for the lack of competitiveness and growth that the UK is experiencing.
November 11, 2011
“I know of few public sector activities where it would be impossible to reduce the cost by 10% without damaging the service. ”
That struck me too – simply drop their salaries by 10% – Barclays new CIO just dropped contractor rates by 10%. Nobody blinked. Do the same to the public sector.
November 11, 2011
I don’t have very much sympathy for the bloated public sector, but there are a lot of low-paid people at the bottom end who could not survive a 10% pay cut. What we should be doing is clearing out the over-paid higher management levels. Anyone suckling more than (say) Ā£60K from the public teat should suffer a pay cut, and the top salaries should be capped. These quango bosses on more than Ā£300-400K should simply not be paid more than the prime minister. This action would have a big impact on salary & pension costs as a whole, without impacting services or screwing the people at the bottom. And anyone who is a graduate of common purpose should be cleared out as a matter of principle.
November 11, 2011
I doubt you would find many of them resigning their posts and, I expect, few of them would be head hunted by the private sector.
A win win for any politician that had the guts to do it.
November 11, 2011
Surely that is a typo. I could find at least 10% in every public sector organisation given the chance. Many large corporations could also cut their costs by a similar amount. If that is a typo, John, you need to correct it asap, before the likes of the BBC stuff you up like a kipper.
November 13, 2011
it’s not a typo, he says ‘i know of few [activities] where it would be impossible’, ie a double negative.
November 11, 2011
What’s ironic is that it’s the left who wants to keep this leviathan going. I worked in Brazil for a couple of years and still spend a few weeks there every year and there is still an overwhelming amount of poverty there, especially when you venture out into the country. I imagine the situation isn’t so different in China.
Yet the left are quite happy to accept money from these countries in order to fund massive public sectors and government bureaucracies here. One can only assume that they really don’t care as long as ‘I’m all right Jack’.
And they have the gall to call us selfish or say that we don’t care about society.
November 11, 2011
I worked in the public sector for a while and there are huge savings to be made. Under Labour scores of non-jobs were created with funding streams attached and the inevitable measuring targets so that public sector bodies could hardly refuse.
Legislation was enacted to force public sector bodies to work together, the reality is they only do enough to get the funding and have learned to write the associate strategy crap to keep the inspectorate bodies happy- even they do not examine properly and are not particularly interested in finding failings. How many bean counters do there need to be?
Look at the tragic baby P case. Tragedies happened before with promises of change to procedure and regulation, a lot written no practical change. The person ultimately responsible for child care- Ed Balls- did not even resign, he blamed a head of children services.
Too many inspectorate and policy makers not enough front line delivery staff. Over paid senior managers who do not understand their brief or are interested enough to find out what is actually happening- if they did they would not need so many to examine what should be happening. Same as ministers, they do not know what is going on in their own department and are being misled by civil servants. Ministers should know the detail of their departments for themselves.
November 11, 2011
A very good synopsis but there is more. Immigration is a costly disaster. They are taking the traditional first jobs of our youth (Eastern europeans) and costing us a fortune in the International Health Service, Education, housing, benefits and similar public services. Our living conditions and overcrowding are becoming intolerable and still nothing is done, particularly the 360,000 annual bring your family bogus student visas scam.
The EU and foreign aid eat up Ā£25 billion net annually yet Mr Cameron claims we have to share an aircraft carrier with the French! No we do not it is specious nonsense and all part of the growing EU evil empire.
Work must be made to pay so more action is needed on reducing taxes, particularly the low paid and removing the uncompetitive 50% Liberal/Labour tax. 62% if you add the additional national insurance.
The attitude to welfare needs to change, it should be frowned on as it used to be, not encouraged as a way of life for many.
Finally when are we actually going to see changes in the ridiculous windmill energy policies and bonfire of quangos?? One couple of elderly neighbours are actually moving into their kitchen/diner to save on their fuel bills!! Shame on the political elite that people who have worked all their lives have to suffer like this to support so many foreign policies and needs!
November 11, 2011
Take heart asylum seekers receive more in benefits than pensioners. University students are expected to obtain huge loans and pay them back for the rest of their working lives- EU students get free university education in the UK- while asylum seekers are housed, fed, educated, given health care and asked not to work while their application is considered. Why should they not be charged and have it as a loan like university students??
Why should the UK provide free health care to the world population and in particular populations of European countries. I am not proud to provide free health care to those who pop over on a cheap flight. When are politicians, and lefty civil servants, going to wake up and join the real world?
November 11, 2011
“removing the uncompetitive 50% Liberal/Labour tax. 62% if you add the additional national insurance.”
As NI is reduced to 2% for those earning over Ā£40,000 per year the upper tax rate is 52%, not 62%.
“The attitude to welfare needs to change, it should be frowned on as it used to be, not encouraged as a way of life for many.”
As long as there are more unemployed people than jobs welfare will remain a way of life for millions of people.
November 13, 2011
There have been over a million jobs created and taken by immigrants in the last 10 years. Not high paid jobs but jobs that would traditionally go to young people. There are 1000,000 (16-24yr olds) unemployed, undercut by foreign labour. Employers happy to pay minimum wages as it is us tax payers who pay for their public services. There should be a premium paid by such employers which would then encourage them to employ British young people.
November 12, 2011
I am with you Tim and your correspondent “Disaffected”. Change will not be possible until we have a government which recoginises reality and represents the responsible citizens of this country. In short, nothing will ever change!
One has only to read John’s Diary to dispair that he is not in the Cabinet or, better still, in 10 Downing Street presently the home of Blair Mk 2.
November 11, 2011
“Yet the left are quite happy to accept money from these countries in order to fund massive public sectors and government bureaucracies here. One can only assume that they really donāt care as long as āIām all right Jackā.”
And the right are happy to outsource all our jobs to these countries as long as they make a profit. One can only assume that they really donāt care as long as āIām all right Jackā.
November 12, 2011
Two sides to every coin as you rightly point out, Uanime5.
Cheaper car insurance ?
Don’t forget to add the hidden financial and social burden placed on the customer (who is most likely a taxpayer too.)
In agreement with others in this thread: if push comes to shove why should Conservative leaning employees (like me) cross picket lines in support of a PM who has broken just about every promise he’s made ?
November 12, 2011
Electro-Kevin: ” .. in support of a PM who has broken just about every promise heās made ?”
We have a conservative Prime minister?? When did that happen?
November 11, 2011
I could not have put it better myself. Well written – and before sun-up too!
Some positive thoughts and blue sky thinking:
The Chinese depend on (low paid -ed) labour, well disciplined, obedient, un-unionised. Why can’t we? After all, we are now a very proudly (mixed race-ed) nation with all sorts of different people clamouring for a job. The Unions, Elfinsifety, Fire Officers, School Inspectors and so on haven’t yet twigged that the immigrants have not bothered to join their crusade.
Being a producing nation is not a pretty sight. And a lot of our new chums come from emerging nations. I look to them to get our economy moving again with their vigour and with the help of modern methods of production and with our tradition of honesty and hatred of currpution.
Dreams? Oddly no. The Free Schools movement has firmly said, “No”, to the English free schools. Those run by Hindus, Jews and Muslims, though, seem to have been welcomed with open arms. And now, our local hospital at Hinchingbrooke is run, I notice, by a consortium of Indians, under the National Health indeed, but really free of interference. And they are allowed to make a profit too.
As I walk through my home town of Peterborough, the people with the bright eyes and hope in their faces are nearly all Indian or Asian of some kind or another. The English stock are mainly old or hopeless looking down at the ground in despair.
November 11, 2011
Mike
The reason why so many have hope in their eyes, is simply because many of them are working in an alternative economy, where the rules are very different to those which are preached by parliament.
Thus they can undercut any legitimate contractor (building trade comparison) who is attempting to abide by the rules as set out.
Let me list a few.
Working hours directive ignored.
Overcrowding rules of occupation of a house ignored.
Minimum wage ignored.
Public Liability Insurance ignored.
Health and Safety ignored
Tax system ignored.
Guarantees given, but worthless, as often they can never be contacted again.
They work on their wits, survive as they can, spread their living costs amongst many.
The result, those who play by the rules and pay tax, go out of business because they simply cannot compete.
We have to make up our mind in this country.
Do we play by the rules (as set down) or not ?
November 11, 2011
They are young and desperate. You wish to increase the desperation of the British person? When I look at young East European girls. I am looking at the buckteeth of youth. My wife does not believe me…
November 11, 2011
You’re quite right, Mr Stallard, because we have destroyed ourselves with feminism, abortion and contraception. The Indians and Asians still have families that stay together and breed children for the next generation.
Until we recover (if we aren’t too far gone) our moral sense, we will continue to decline.
For this crisis is moral (economics surely follows morality) and was highlighted by some Chinese fellow a week or two ago who said that Europe had destroyed itself with welfarism. I think he was partly right, but its cause is statism, socialism, whatever you call it.
And paper money is a consequence of the rise of the power of the state. Nothing will be solved in Europe until we get shrink the state and recover our freedom from fiat money – some hope. There is little indication that Cameron and Co understand this, or if they do, are in sympathy.
November 11, 2011
The UK may already have passed a population of 70m , do you think it is sustainable for it to keep increasing to , 80m , 90m , .. 200m ?
I find the abortion figures depressing but what is wrong with contraception as a means of attempting to limit U.K. population and keep family sizes within the range people can afford to bring up ?
November 11, 2011
“Youāre quite right, Mr Stallard, because we have destroyed ourselves with feminism, abortion and contraception. The Indians and Asians still have families that stay together and breed children for the next generation.”
China has a 1 child policy to reduce their population, Japan has an ageing population due to a declining birth rate, and India has lots of problems because their population keeps increasing.
If the UK population was 2.5 million lower then there wouldn’t be any unemployment.
November 12, 2011
I can’t support the way China implements it’s 1 child policy but admire them for having the policy in the first place .
You may or may not know that this policy is neccessary because Chairman Mau encouraged the Chinese to have 6 children .
The Chinese people I know still talk fondly of him – because he was a very human and very flawed man .
If you are saying that we have too many people and it would be better if we tried to encourage a declining population then I completely agree .
November 12, 2011
Ridiculous comment. The one greater threat to GB than the green/red alliance is overpopulation. There are far too many people here already. Without contraception we’d be sinking. If I could wish for one policy it would be to make all child related benefits payable for only the first two children born to any woman. Do you think the horrendously high birthrate among under sixteens is something to celebrate? It is surely one of the factors dragging down our nation.
November 11, 2011
The English as with other Northern Europeans on both sides of the Atlantic are being destroyed by Cultural Marxism; the vectors of this plague need to be eradicated from our society. The problem we have is that politicians like Cast Iron believe it to be the ‘modern’ way and adopt its mores with enthusiasm; can they not see the harm it is doing to us, or do they not care?
November 12, 2011
Mike Stallard – No mention of lawyers in your hit list of ‘crusaders’ ?
I’m not sure how serious you’re trying to be here.
November 12, 2011
A point of order to add to that.
Would such racial stereotyping be allowed in reverse to Mr Stallard’s comment ?
November 11, 2011
You say:
I know of few public sector activities where it would be impossible to reduce the cost by 10% without damaging the service.
Just 10%! Anyway many public sector activities deliver no useful “service” whatsoever or services that are better not provided. Many more deliver a “negative” service of inconvenience to the public.
I see that in a recent dispute, a cohabiting couple, had to get ten separate court judgements from our wonderful legal system (over a share of a house dispute) before a definitive judgment was finally delivered. A judgement that will doubtless introduce yet another level of ambiguity for the next victim or the legal system.
Spinning a wheel on day one would have given a more satisfactory outcome . An absurd system with mainly the interest of the courts and lawyers at heart.
The state sector is very similar with mainly the interests of the senior state sector employees, power and vote buying at heart. One cannot run the system well anyway unless one can fire staff cheaply and easily. Something Cameron has totally failed to address.
Still we have poppies on the England footballers and “equal” gender succession in 65 years, no retirement laws and lots of pointless green house bling.
November 11, 2011
I see that the CBI has condemned the feed-in tariff cuts for photo voltaic. As so often (particularly on the EU issue) they are totally wrong again. The real question is why on earth the government started this silly & pointless industry and why they are retaining any feed in tariffs at all.
Clearly if PV makes any sense at all it is better to put them on the ground rather than roofs (to keep installation and maintenance/cleaning costs down), do it on a large scale and somewhere sunny. In fact it does not even make sense then with current technology.
Doing the roofs of semis in cloudy England is just total insanity. Doubtless much avoidable litigation on misleading return claims will ensue. Still people may be able to power the odd electric tooth brush or two and feel good about it.
November 11, 2011
In my small Cornish village a barn conversion was delayed for over 12 months because the council nit-picked over the colour of the roof tiles. Now they can just stick solar panels all over it with no questions asked.
What happens when the panels deteriorate or fail? In a few years time there will be thousands of houses with broken or defective panels stuck on them.
November 11, 2011
Indeed planning are always holding things up for silly reasons insisting on expensive bat reports or similar, one three story building I had was built to0 high (by 5 inches) but it was behind tall trees and the nearest building was hundreds of yards away – still it held it up for months and cost thousands and jobs too.
The electricity generated will not, at true value pay for fitting them and cleaning the moss off them . There is more energy in the wood and grass from the garden than from the PV nonsense for most houses.
November 11, 2011
Frankly, there should be no subsidies via FiT at all. We need economically sound investment in energy, not vanity projects.
November 11, 2011
I see that the Met Officeās is expected to launch a service attaching a probability of its forecasts being correct. It will be interesting to see what probability they put on their 100 year climate ones. Given that, in my experience, many made just for a day are two hence, often seem to be rather less than 50% accurate.
November 11, 2011
Climate and weather aren’t the same thing.
November 12, 2011
Climate is weather, just averaged over a longer time scale. They cannot predict the average weather for 100 years time (averaged over a day, a week, a month or even 20 years. Nor can they know if hotter is worse or better than colder, nor can they tell what energy systems we will be using, not what volcanoes will be erupting or not, nor millions of other variables.
November 11, 2011
I see that it is reported that:
Banks are discriminating against women, particularly those who are pregnant or on maternity leave, according to a study. Deputy Prime Minister Nick Clegg has promised to investigate the claims that women are being denied mortgages and loans on the basis of their gender.
I assume he would prefer the banks not to assess the real risks of lending or likely changes to income etc. Being discriminating used to be a complement – providing one is doing it on a sensible rational basis it still should be. Not doing so is very likely to lead to losses and bust banks again.
Who is best to judge risk Nick Clegg or the person making the loan.
November 11, 2011
One of the drivers of the sub-prime fiasco was a report on banks lending that showed that they were discriminating against minorities.
It later turned out that this report was full of errors and that the banks weren’t biased.
Needless to say the policy of ‘positive discrimination’ stayed in place long after the reason for implementing it had been debunked.
November 11, 2011
Indeed soon, no doubt, Clegg will be ordering banks that they should give 30 year loans to 95 year old’s just as they give them to 25 year old’s. As otherwise they are evil ageists.
Also clearly they should not judge business loan applicants on intelligence as that would clearly discriminate against the dim. Or judge them on the poor maths in the business plan forecasts as that would discriminate against those suffering with a mathslexia disability.
Indeed they should clearly toss a coin to decide applications or just lend to everyone or no one.
November 11, 2011
A break-up of the euro, says Vince Cable (the anti-business secretary), would mean an ‘economic Armageddon’ for Britain.
But the alternative is even worse – wake up Cable and get real – it is the least worse option for all. The problem, Vince, is you and your parties absurd twin religions the EU and Green ones and determination to destroy European democracy such as remains as a result.
Daniel Hannan put it rather better than I do:-
http://blogs.telegraph.co.uk/news/author/danielhannan/
November 11, 2011
I think it’s perverse for Europe to expect China, India and other developing nations to bailout the Eurozone. It is after all a political project that has failed and the sooner it’s put to bed the better.
After the smoke clears perhaps we will once more gain the work ethic, cut welfare and start producing things.
Europe is the richest continent and should be forced to sort out its own problems by reducing the public sectors and concentrating on the wealth makers.
Once again socialism has been proved a failure, how many more attempts to bankrupt nations before the elite get the message.
November 11, 2011
The left would rather kill the messenger than accept the message.
November 11, 2011
“I think itās perverse for Europe to expect China, India and other developing nations to bailout the Eurozone.”
Why? The Eurozone is one of their largest customers.
“After the smoke clears perhaps we will once more gain the work ethic, cut welfare and start producing things.”
Not unless we stop exporting all the jobs to China and India.
“Once again socialism has been proved a failure, how many more attempts to bankrupt nations before the elite get the message.”
High levels of outsourcing is a failure of capitalism.
November 12, 2011
Uanime5 – High levels of outsourcing is a failure of capitalism AND welfarism.
House prices, the motivation and competitiveness of our people, legal rights issues, the cost of broken families …
All would have been better without uncontrolled welfarism – the effects of outsourcing (and immigrant labour) would have been far more apparent and the politicians would have been called to account much earlier.
Also derestricted credit enabled the effects of eastward drift to be mitigated by creating feel-good where there should have been great trepidation.
November 11, 2011
Succinctly put and in clear laymanās terms. Why cant everyone see what some of us have seen as self-evident for a good while now? I only wish your voice were louder (and heeded) in Westminster John.
November 11, 2011
Interesting article! The big picture is important: How to make countries live within their means?
There is huge scope for reducing the public sector in Greece, and and for de-bureaucrizing Italian economy. Currency devaluation (drachmas lires) doesn’t achieve any of those, and doesn’t guarantee a country will start living within its means.
If the eurozone once looked like a Dutch ācoffeeshopā (the drug of cheap borrowing available), fiscal integration and bailouts will now turn it into a ārehab-clinicā, in which countries are gently forced to mend their ways and restructure. Obviously, no better rehab-doctor than the IMF, so I support Mr. Witteveen’s (ex-IMF) idea for IMF funds rather than artificially leveraged European funds.
Lastly, I enjoyed reading in the WSJ “Italy Isn’t the Problem”, which focuses on the global banking industry as a culprit. How can too much borrowing exist without ātoo much lendingā and who are the professional lending experts?
November 11, 2011
Quote: ” How can too much borrowing exist without ātoo much lendingā and who are the professional lending experts?”
The answer is: easily if the lenders think that the Germans are going (eventually) to pick up the tab if things go wrong.
They, in the the EU, are now finding that a Franco-German Empire comes at a cost.
November 11, 2011
“They, in the the EU, are now finding that a Franco-German Empire comes at a cost.”
If tensions get worse in Europe, the Franco-German alliance itself may collapse.
If that happens, all bets (political and economic) are off.
People just assume that the ’20s and ’30s cannot come back. I’m not too sure.
November 11, 2011
@The road to surfdom:
I cannot see Germany ever picking up the tab for US or UK overborrowing. The WSJ article, which can easily be googled up, looks at the global banking industry.
November 11, 2011
PvL: “I cannot see Germany ever picking up the tab for US or UK overborrowing. ”
Why on earth should it?
But despite that, Germany may appear to be in rude financial health, but a number of her well known banks are not!
November 11, 2011
@APL: Indeed, and banks carry some responsibility for their own health, so the WSJ rightly points a finger of blame to the global banking industry.
November 12, 2011
Peter van Leeuwen: “so the WSJ rightly points a finger of blame to the global banking industry.”
See, Europeans can agree on something without a massive bureaucracy to facilitate agreement [smile].
But the Banks couldn’t have behaved in the way they did with out the ready collusion of the politicians.
So we should not permit the blame to lie solely at the feet of the Bankers, politicians deserve their fair share too.
By looking to them for answers, we let them off the hook.
November 11, 2011
Of course, Mr Peter van Leeuwen’s country shows the other side of the argument:
A country which has consciously chosen to have a large public sector and services and high levels of taxation to support it.
The difference is that, certainly by European standards, the Netherlands public sector is efficient and properly funded, and takes good advantage of natural advantages.
UK (or club Med/club East) cultures could never achieve this – not enough personal integrity, not enough work ethic !
November 11, 2011
“Currency devaluation (drachmas lires) doesnāt achieve any of those”
other than making the productive economy more internationally competative?
November 11, 2011
@forthurst: True. (Estonia managed this competitiveness by wage cutting and remained in the euro).
But did UK currency devaluation do anything to make the public sector in e.g. Norther Ireland a bit smaller? Does currency devaluation protect against a borrowing addiction?
November 11, 2011
No. Devaluation helps the productive economy to become more compeitive; it can’t stop politicians spending money we don’t have.
November 11, 2011
You sum it up very clearly indeed. Unless the European political class adapts and changes to reflect the reality of its situation, it will die. The same is true of the current leadership of the three main UK political parties. They are drunk on debt, spending as if there is no tomorrow.
November 11, 2011
Lifeligic, The couple you describe chose not to enjoy the relatively settled jurisprudence associated with marriage, did not avail themselves of binding arbitration, could not agree an Order, did not accept any of the appealed Judgements, or compromise any of those by agreement. They could also have sought different legal opinion. Sometimes you have to take responsibilty for your own decisions? Does this sound familiar?
John, can you offer a view on something else. I fully agree with your analysis. When we hear however, that it is the EU that is forcing Governments out ( undemocratically) is there any truth in the suggestion that it is not the EU but rather the markets that are having this result?
Reply: It looks to me as if the EU forced The Greek PM out as they did not like his referendum, and helped undermine Mr B in Italy as they did not like his views. The failure of the EU to spin in favour of either, and to allow the idea of chaos to build up, is the background to their loss of office
November 11, 2011
Well you can’t expect the EU to support a leader who got his country into large amounts of debt, then demanded a bailout. If Italy or Greece were failed companies that needed to be bailed out you’d expect the CEOs and senior managers to get fired.
November 12, 2011
Uanime5
Shouldn’t their own people do the firing ?
Glad to see that you seem to acknowledge that the EU fires national governments.
I’d welcome more people of a Left-leaning disposition admitting that the EU has the power to do this.
November 11, 2011
A brilliant article which should be duplicated and sent to every home in this nation.
It sets out in the clearest terms just what is happening, something our TV news channels fail to do as they just concentrate on the personalities involved rather than proper analysis.
It is as if we might get bored or be unable to understand the detail.
There is going to be some very turbulent but interesting times ahead, as we watch politicians and the huge public sector salariat all over Europe squirming and panicking as the money to pay their wages simply runs out and they try to save their careers.
Who will they try to deflect the blame on to? My bet is the bankers.
November 11, 2011
China, a 3 or 4 trillion dollar economy, could not save europe, a 10-15 trillion dollar economy, even if it wanted to.
Britain, total debt of 500% of gdp, is going to have to do a lot austerity to get back into balance. Italy is well off by comparison.
But the central bank is printing more money (debt). It does not take much to work out that this is going to end badly.
November 11, 2011
Only in the UK would contributors on a right-wing blog, bandy about fantasy numbers(percentages) to prove their country is “finished”, with such a smug air of satisfaction.
November 11, 2011
Gary, of course, is a well known but harmless left wing visiting blogger to the site
November 11, 2011
I dont get the sense that you do that contributors on this site display any “smug satisfaction” about the decline of this country’s finances.
This decline will affect all our standards of living and the quality of life of our next generation.
I do however get a feeing of a great sense of frustration at the continued waste of huge sums of our money trying to prop up a European currency project which seems doomed to be a failure.
November 11, 2011
Get your head out of the sand. Stop using jingoistic labels to wish reality away. Left, right, centre, up, down, here are the facts :
see Exhibit 5 on page 18
http://www.mckinsey.com/mgi/reports/freepass_pdfs/debt_and_deleveraging/debt_and_deleveraging_full_report.pdf
Please supply your own research explaining why you disagree with these numbers.
November 11, 2011
This a a graph of private and public debt. The Government only need to worry about public debt, unless it needs to bail out the banks again, so the level of austerity needed will be much lower.
November 12, 2011
You are short of facts.
The govt is not some isolated entity in the country. The country’s debt is the total debt. Austerity , or cutting back on expenditure, is not the sole preserve of the govt, but households and individuals also practice austerity when they cannot make ends meet. Mainly because people are losing their jobs. The deleveraging is proportional to the total amount of debt.
And if you think our govt debt is OK, here is a chart from SocGen that shows our govt debt(on and off balance sheet) is worse than Italy and Spain. France and the USA are worse than us.
http://ftalphaville.ft.com/blog/2011/10/27/714326/edwards-going-bust-and-ecb-qe/
November 11, 2011
I totally agree about looking at the bigger picture. I also think the maths needs to be done on the back of a fag packet too. When you stop worrying about the details you get to worry about the bigger picture – which is far worse.
If we have been borrowing 20% more than we can afford for 7 years that means the public sector (and taxes) needs to make a 20% adjustment downwards for 7 years.
How much is that 20% for 10 years going to cost. Whilst the Governments all borrowed at 1% for years NOW the markets are re-evaluating Government bond risk. A couple of research reports I read this week and now saying we need to price Government bonds at around 5%. The low interest rates we have had for years are about to come to an end. So best case scenario – at 5% – for 10 year bonds will cost a further 10%.
So basically the UK needs to cut Government spending by 30% for the next 7 years – just to get back to spending what it receives in tax and to stop sliding into the abyss. That’s a huge drop in GDP and standards of living. Try telling a New Labour Luvvy that.
On top of that China’s growth is now slowing dramatically. It’s growth was not ALL sustainable growth but based on borrowing from the West. As I have posted on this blog before China really worries me politically. It is one of the most brittle societies in the world and a revolution is well within consideration.
In the mean time
November 11, 2011
Javelin ,
You say “not all sustainable growth” .
No growth rate is sustainable indefinitely is it .
If we have financial systems which requires the dynamics of continuation or increase of growth rates over the long term then we have an unsustainable situation .
I think this adequately describes the global financial system .
People are expected to run harder and harder just to keep from falling behind .
With natural limits such as population , supply of food , water , energy we may well have to learn to live with negative growth .
The concept of indefinite exponential growth is nothing more than a confidence trick and I can’t believe how many people have bought it .
November 11, 2011
China is NOT “slowing dramatically”.
China didn’t “borrow from the west”, it attracted huge levels of direct investment.
Hope that eases your anxiety.
November 11, 2011
“China didnāt āborrow from the westā, it attracted huge levels of direct ”
Yep . I’ll have a go at explaining the events that followed and you can tell me where I’m right/wrong .
1) Rich and powerful invest heavily to transfer the means of production from the West to the East
2) Wages in the West fall
2) Western consumers can no longer afford to buy the products from the East , especially when they are expected to feed the proberdy monster .
3) The rich and powerful close down pension schemes to boost immediate consumption of the imported goods so their factories continue to make money for a few years
4) The West is not consuming enough to keep the proliferating factories of the East afloat so the rich and powerful arrange for people in the West to borrow to support consumption
5) Sh1t hits the fan and the rich and powerful arrange for the resulting mess to be socialised
November 12, 2011
Simon – You forgot to mention credit card and mortgage debt backed by the housing booms. I’d put that between 2 and 3.
November 12, 2011
It’s fantastic really isn’t it .
The increase in credit leading to jacked up house prices provides a positive feedback within the loop leading to increased credit until we end up having secured lending against previous borrowing .
November 11, 2011
For example …
Cogs of Chinaās credit machine grind more slowly
http://www.ft.com/cms/s/0/6f851e30-0b8d-11e1-9861-00144feabdc0.html#axzz1dPt4RFal
China’s export growth slows down as global demand falls
http://www.bbc.co.uk/news/business-15669733
November 11, 2011
John Maynard: “Hope that eases your anxiety.”
On the strength of your two assertions. That’s OK then, China’s economy will continue to grow at 10% indefinitely.
But the truth is, the West have outsourced production to a low cost and, at the risk of being censored by our host, effectively a slave economy.
China is a very significant purchaser of US treasury and apparently Euro bonds. They do that because they do not buy much from the West. So they need to do something with all those USD and EUR we pay for their stuff with. So they finance the US government and the Euro region.
In American parlance, it’s a ‘circle jerk’.
If China traded with the West, that is bought some of our manufactured goods, then you might describe that as a trading relationship.
China is an exploitative mercantile power, if you think that is good then look at the British relationship with China in the 1800 and consider how well they did out of it.
November 12, 2011
First, you have to realise that the world’s appetite for manufactures is rather limited.
Great swathes of the world now have saturated markets for basic manufactures.
In short, there is not enough manufacturing to go round.
As India, China, Brazil, and a dozen more, ramp up their manufacturing industries, (a rather straight-forward branch of human endeavour and eminently transferable across borders), it will become a very unprofitable place to be.
Evil capitalists did not “transfer productive assets to China”, they built brand new ones of a scale that not even the US could match.
Contrary to myth, a high proportion of those manufactures go to meet surging demand in China. The benefits of scale and competitive wage rates (sorry, “slave labour”), mean that the whole world has gained from lower prices, which in turn has stimulated demand.
You could, maybe, accuse China of dumping, but not of mercantilism. Government policy is to import more and rapidly develop domestic demand and the service economy.
Many low end manufactures have already been shed by China and taken up by countries like Bangladesh and Vietnam.
(all of this used to be commonplace teaching at western universities and business schools, but nowadays has become “political”).
The US, as mainly a producer of mass manufactures, and with a risk-taking business class quite prepared to invest in places like China, has suffered more than Europe, where even simple, commonplace manufactures like vacuum cleaners (Miele), have been converted into “branded products”.
Mercedes, BMW and the rest are essentially branded products.
Germany, which was sclerotic, received a new lease of life with the rise of the middle-class in India and China, and their obsession with “brands”. (and the world’s great resource companies, of which a large proportion are British, also received a timely boost)
How long do you think the “new German miracle” can last ? a decade ? two ?
In a way this has set back the necessary restructuring of the German economy.
Now, a bunch of halfwits, in countries like Britain, think we should turn the clock back and restart a mass manufacturing industry.
Afterall, Germany is doing fine and is heavily reliant on manufacturing exports, so it must be the right thing to do, mustn’t it ?
November 11, 2011
JR exaggerates the problems and doesnāt quite hit the nail on the head. For example he says āThe truth is markets will only calm down and refinance states at affordable rates again if governments not only say they intend to live within their means..ā Well, āmarketsā are currently happy to lend to the US and UK at a zero or negative real rate of interest (i.e. after taking inflation into account).
As to the EZ, the EZ as a whole does not have a serious debt problem, though some INDIVIDUAL COUNTRIES obviously do.
reply: The US and UK have sustained their high borrowings by printing it.
November 11, 2011
JR: If you are saying that the US&K have used the printing press to manipulate interest rates on their debt downwards, I agree they have. But there are strict limits to how far this can go. International investors wont invest at a zero real rate of interest in the debt of a country which they think is making totally irresponsible use of its printing press.
Reply: They did in Japan, but Japan doesn’t seem to do inflation
November 11, 2011
It seems incomprehensible that Goverments do not understand what money is – a means of exchange. If you value your currency too high -by linking it to another strong currency – then you will be weakened., and the strong currency will enjoy exchange (export) benefits. So many eminent economists (those without political bias) pointed out the dangers of a common currency years before the EU. Yet governments, so hoisted with their own petard paid little attention and as with all these scenarios it is the innocent masses who have to suffer the explosive consequences.
November 11, 2011
“The truth is markets will only calm down and refinance states at affordable rates again if governments not only say they intend to live within their means for a bit, but manage to do so.”
Well, that’s Britain stuffed then!
November 11, 2011
The US and the UK printed money to keep interest rates down, and allowed their currencies to devalue, to help price themselves back into world markets.
=========
And both have also borrowed and spent just like the others. At least the Greeks have an excuse, tax avoidance. Doesn’t apply here.
November 11, 2011
The public sector does have to raise pension ages and change future pension entitlements.
========
Why?
Oh yes. You’re running a ponzi fraud. You’ve run out of new mugs to pay out for early joiners.
November 11, 2011
Enrol them directly in NEST .
If it’s good enough for the private sector it should be good enough for everyone .
Except it isn’t good enough for anyone .
Why can’t we have a proper debate about pensions for everyone and not pensions for one group in isolation of the other BEFORE yet another “initiative” which will have to be replaced is implemented ?
November 11, 2011
If public sector workers are going to get private sector pensions they’ll want private sector salaries as well. I doubt that the NHS and education department will be able to afford to pay private sector salaries to everyone in the public sector.
November 12, 2011
What planet do you live on ?
I think you will find private sector salaries are a lot less than in the public sector.
November 11, 2011
Think back 50 or so years at the proportion of the nations productivity the public sector used to consume and then consider what it did with it and I am sure you will find vast savings that could be made today.
Of course there will be vested interests jealously gusrding their empires and would need to be dealt with robustly, and that is not what politicians are very good at, are they?
The answer lies not in fiddling at the fringes with the odd ten percent but with a sound destruction of all the unnecessary service providers notwithstanding their pleas for exceptional treatment or their warnings of doom should their services not be provided.
If the thorn is not formly grasped sooner rather than later, be sure that running out of funds will be certain to do the trick, and printing the stuff will work only in the short term.
Osborne has received a very good notice period from the markets and if he cares to ignore it then he does so at his peril. Cutting the deficit over the medium term period is simply not enough.
November 11, 2011
Agreed.
November 11, 2011
An accident waiting to happen, we need to get back to 2003 levels of total Government expenditure (non-inflation adjusted).
November 11, 2011
Of course the frugal Germans did get a weaker currency than they deserved, so It’s not just their teutonic frugality, the system was rigged in their favour. A DM would have been stronger than the ā¬, so German thrift is as much a monetary feature as the Asset price bubbles of the periphery.
Germany broke it, now she should pay for it.
November 11, 2011
Doubly agreed!
November 11, 2011
The sad fact is that our own government is still spending and borrowing too much as you have previously highlighted. They talk about reducing the debt when they plan to increase it by at least 50% . They have wasted the opportunity to really get our economy back on track and now, because they have failed to do what they should have done and reduced spending significantly and stimulated private sector growth, they are pleading with the eurozone to abandon democracy in those countries within that zone in order to cover their own shortcomings. It can only be a matter of time before the markets decide that we aren’t such a good bet after all and start increasing our interest rates. What happened to strong, prudent leadership?
November 11, 2011
It is not a fact that they are spending too much, nor even borrowing too much for that matter. It’s an opinion. Another one is that they are taxing too little.
November 11, 2011
“They talk about reducing the debt when they plan to increase it by at least 50%”
They are trying to reduce the deficit, not the debt.
November 11, 2011
I know they are supposed to be trying to reduce the deficit that is my point; too often I have heard Cameron and Osborne talking about paying down our debts which I find irritating when they are in fact increasing them.
November 11, 2011
“I know of few public sector activities where it would be impossible to reduce the cost by 10% without dmaging the service.”
Perhaps, but you still have a duty to reduce the overall public sector costs, even if it does involve damaging some services.
November 11, 2011
No you don’t. You could equally raise taxes to cover the shortfall if you don’t want to “damage the service”. The way to cut a deficit isn’t just to cut spending.
November 11, 2011
I thought the policy was to raise tax selectively in the public sector by 3% by increasing pension contributions James. It’s not going well as to do so will collapse public sector pensions which isn’t really a good idea and people are annoyed by all they lies they’ve been told.
I too am wondering why they don’t just stick everyone’s taxes up a little.
November 11, 2011
James Reade: “No you donāt. You could equally raise taxes to cover the shortfall .. ”
1. Few people in the public sector pays tax.
2. The effect of raising taxes to ‘cover the shortfall’ would be to further crucify the private sector.
Rebecca Hanson: “I too am wondering why they donāt just stick everyoneās taxes up a little.”
Do you remember at the begining of the crisis the line was, ” we must encourage people to borrow and spend more ” because that was the only way to keep the ponzi scheme going.
Well, if they raise taxes, then that runs counter to the idea that the pols want people to spend more into the economy. You have less disposable income less money to spend – hence raising taxes is counter productive to their stated aim.
November 11, 2011
Banks real costs of borrowing from the central bank is less than ZERO. They borrow at 1.5%(or less) from the central banks and inflation is running above 1.5%. Govt bonds(taxpayer bailouts) were injected into banks to shore up banks balance sheets , the banks used the bonds as collateral went to central banks borrowed at 1.5% , took the money and bought more govt bonds in the market , used them as collateral, borrowed more money from central banks, and on and on… Banks pretended the govt was healthy, govt pretended banks were healthy, rates stayed low, the economy “boomed”, boom and bust was abolished, all was well. A classic ponzi scheme. The system had 100% probability of failure. Risk was loaded onto the “safest” govt bonds and in the process made them 100% guaranteed to fail. What was the necessary link that made this possible ? Unlimited, almost free money from the central banks. Without that, there would never have been “too big to fail”, and the ponzi could never have started.
November 11, 2011
…and what are they doing to dismantle this deadly embrace ? Printing even more money at ever lower rates(as inflation picks up) !! Brain-dead !
November 11, 2011
“For many years now the west apart from Germany has decided to live beyond its means. It has imported its lifestyle from China and other emerging markets”
How were the little people supposed to stop the rich and powerful moving their jobs and the means of production East ?
Some people in the West have done very nicely out of globalisation at the expense of the masses .
The system is broke and Govt’s are going to find it very diffiult to persuade people to keep running faster and faster in their hamster wheel when it is becoming apparent to all that it won’t make any difference to them .
The peasants can become quite revolting .
November 11, 2011
PS the Chinese didn’t just built factories and attempt to go head to head with the established powerhouses of the West .
They persuaded the rich and powerful in the West to transfer the means of production East .
The average man in the street over here has been betrayed and the limit of his blame should be the amount he has borrowed directly to support his lifestyle .
November 11, 2011
The same thing can be seen by the maintenance of high accomodation prices by the restriction of planning permission .
All it does is jack up mortgages to ensure that a higher proportion of peoples lifetime earnings go to the financial services industry than circulate in the real economy .
November 11, 2011
A very good point.
I remember the days of MIRAS (Mortgage interest relief at source) where tax payers got tax relief on their mortgage interest payments – top rate tax payers did very well out of this.
All this meant was that people could then borrow more from the banks/building societies as the government paid some it it. In effect, MIRAS tax relief just boosted the profits of the finance services industry.
November 11, 2011
Apparently the head of the CBI wants to enable the new generation to use their pensions to back mortgage loans .
Apparently nobody told him that the young don’t have pensions .
This is a “businessman” who came out of University and went straight into the CBI and has less experience of business than dustmen – who in my experience are actually pretty savvy – and know a lot more about generating energy from waste than I bet Chris Huhne does , even if they can’t sing like that other dustman Mike Harding .
November 12, 2011
There are lots of things driving up property prices:
– mass immigration
– increased lending multiples
– TV property hyping
– divorce
– single parenting
– longevity
– BTL speculation
– BTL to cover wrecked pensions
– BTL propped up by the welfare system in areas of low employment
Fine. Scrap green belt to bring prices down rather than address the underlying issues (and fail to answer where the supporting infrastructure will come from.) Leave the doors open to mass immigration. Why not scrap vast parts of the military too ? Oh. We’re already doing that.
One question …
Why do we need a Government ?
November 11, 2011
“Controlling public spending is a necessary but not a sufficient condition for growth”
Precisely.
The sufficient and in the long term necessary condition for growth is
economic freedom + cheap energy = fast growth
We could haqve those any time the government wanted.
November 11, 2011
Economic freedom and cheap energy don’t necessarily come together if the price of energy is high. Economic freedom is also essentially useless if people don’t have sufficient information on how to use that freedom.
November 11, 2011
Anyone else get the impression that the sudden rise in petrol prices was not accidental?
November 14, 2011
When the price of energy is high it isn’t “cheap energy”.
Simon I happen to prefer wealth to the opposite. Perhaps you could give some reason why “we need to get away from” this preference.rather than merely telling us what you think we ought to want.
November 11, 2011
Neil ,
We have to get away from this obsession with “growth” .
Of course the U.K. can be doing a whole lot better than it is at the moment but indefinite exponential “growth” is contrary to the laws of nature .
It’s a myth when what we really need is a system that works at a constant level of output and does not require a dynamic of “growth” .
November 11, 2011
Your last paragraph seems to be supported by two articles in todays FT, the first being about the UK’s emerging status as a ‘safe haven’ for investors and Nouriel Roubini’s commentary for the FT’s A-List ; “Why Italy’s days in the eurozone may be numbered”
Others are now speculating that as the eurozone deteriorates and the political dithering continues into next year that the pound will rise against the euro to e1.40 where it was three years ago. This would be a game changer and in the short term it will lower the cost of borrowing for the chancellor. The UK is still a net importer of fuel and other goods and services so they will be cheaper and foreign holidays more affordable. Olympic tourists may feel the squeeze. Only time will tell if the UK can manage this new status given the declining economic situation in europe, our largest export market.
November 11, 2011
We won’t get out of this mess unless the government STOPS doing things!
November 11, 2011
Mass media across Europe generally report cuts to public sector spending as bad news, forgetting that money always has a credit as well as a debit.
Increases in taxes are also reported as bad news. Once again this leaves out one half of the equation.
Governments pander to both of these half truths and end up in debt.
The result is that the public sector becomes bloated as it always finds ways to empire-build as a way of consuming the cash and asking for yet more. At the same time governments find alternative ways of funding the waste through devaluation (if they are not in the Euro) or borrowing.
If my analysis is correct (and, if it is I am sorry I stated the obvious), what is the solution? If the media continue to report only one side of the argument and governments continue to be swayed by this, surely this will all happen again and again?
November 11, 2011
The distinction is usually lost on right wingers. The eurozone is not a currency union with Germany. A currency union with another country implies that country keeps their currency, their central bank, their ability to print money. Germany doesn’t have this nor has it since 1999. It relinquished its Bundesbank in favour of the ECB, its long-held reputation for sound monetary policy for an entirely new institution, bound up with a lot of less reputable countries (as we’ve since seen the predictable repercussions of).
As correctly noted though, Germany is reluctant to do its bit to keep this arrangement going (a union between countries, not with one particular country). Germany is unwilling to allow essentially the ECB to do what central banks do in highly indebted countries – print money.
Another point generally missed by right wingers is that to get out of this mess, states don’t need to do less. They could do less. But they could also tax more. Something that is usually greeted with incredibly bile and vitriol, and assertions (without a shred of evidence to support them) that we are already past the peak of the Laffer curve, that tax cuts pay for themselves, etc. I’m waiting for that response…
November 11, 2011
“Germany is unwilling to allow essentially the ECB to do what central banks do in highly indebted countries ā print money.”
The ECB is the central bank of no nowhere; that is the problem, or one of them.
(Thanks for pointing out that right-wingers are alwats wrong and left-wingers are always right. That must explain why the the USSR was a runaway success and the EUSSR is shaping up along the same lines).
November 11, 2011
American capitalism wasn’t so good in 1929. They needed a lot of regulations and socialism to fix that problem.
November 11, 2011
That was not a problem of capitalism but of the private secret Fed. If there had been no Fed, there would have been no depression. A criminal bankster class is not a sine qua non of a successful capitalist economy, in fact I’m pretty sure Adam Smith did not prescribe it at all.
November 11, 2011
No need to wait for that response, just have a political party win on that ticket then I, for one, will quite unhappily accept the democratic result.
Unfortunately for the ‘raise tax’ brigade (even though we’ve seen plenty in the last couple of years) the Lib Dems, Labour and the Conservatives all ran mainly on a spending cuts ticket in the last election.
Maybe Labour will announce they’ll run on a ticket of ‘increase the size of public sector and increase taxes’ for 2015?
I certainly hope so.
November 11, 2011
I thought the point of the Conservative party was that it did what was economically right rather then focusing entirely on instant media opinions.
I suppose WAS is the operative word there.
I’m not convince increasing taxes will save the Euro though James. I think it’s structurally flawed. I don’t think you can run a single currency without substantial single governance.
I’m willing to be proved wrong though….
November 12, 2011
“I donāt think you can run a single currency without substantial single governance”.
This has become the new orthodoxy, but actually, it is probably just another fallacy.
Does anyone really think that a Franco-German government directly running (say) Romania and Greece, would result in those two countries suddenly developing world-competitive industries, paying their taxes and turning away from cronyism, nepotism and tribalism ?
November 11, 2011
A measely 10%. What a sentimental old softee, you are? More like 30% or 40%.
Instead, your 5% inflation rate is ripping the balls and heart out of the rest of civil society.
Reality check.
Italy at the knackers. So too France. And the UK will follow.
Still, carry on printing the green stuff. My cat has a put option that after QE5 he will parking his bum on freshly-minted Ā£50 notes.
I’ve gone long in baked beans, as in hiding boxes of them in the cellar. My only consolation is that the banksters will be getting their just deserts though I suppose they long ago lost faith with their balance sheets and are stocked up on gold and modern art.
November 11, 2011
Here’s an idea, why doesn’t France drop out of the Euro and join with us ? the French could go back to the Livre, which is where we got the pound from in the first place, (ever wondered why the pound is represented by a capital L, Ā£ ), We are actually closer than a lot of people would give us credit for, and we could teach them how to farm, and pay tax and other areas where they have a weakness. We would end up with 3 aircraft carriers between us, and regain friendly ports in places in the world where we have been missing from for a while. Both sides would also have someone to blame when things got difficult.
November 11, 2011
Edward VII loved France and had a special chair made for him when visiting his many French friends in Paris. Entente cordiale…….
That was 100 years ago and a lot of water (Petain, Laval, de Gaulle, Monnet, Delors) has passed under the bridge since then.
November 11, 2011
Much of our overspend on public services is related to legal obligations. It would be much easier to prune the civil service if the rules and regulations were pruned first. (but they come from the Central committee in Brussels, did you say?). A component of that would be making it easier to ‘let go’ non-performing and surplus staff, especially if they are vibrant. The policy if employing staff specifically because of their vibrancy needs to be ditched since it is extremely unlikely to not be exacerbating the problem. As we know, in some circumstances, qualifications for entry have been reduced to the point where people are being recruited who are too stupid to do the job. All public pensions need to be switched to money-purchase; that ponzi scheme paid for by the real economy is unsustainable.
November 11, 2011
Do we need more care in selecting our senior civil servants; I note that the Home Office which has been experimenting with removing barriers to entry to the UK for terrorists etc (employs people who marry recent migrants-ed); should not the civil servants in the Home Office have a personal desire to restrict foreign immigration subject to parliamentary oversight. I have spoken to someone who works for the Home Office and he reports that they are livid with some of the instructions they have been given which are clearly designed to be extremely unselective in who is allowed entry.
November 12, 2011
Ha-ha, the classic British time-serving, bloody-minded, jobsworth, ordered to stop harrassing ordinary citizens too much ?
Of course he’s “livid” !!
November 11, 2011
John I phoned Mike Stallard and asked him what it was you had [Ed. Censored] in his comment earlier,he told me and when I asked him why he thought you had done so he said you are scared of the BBC portraying you in a bad light,well , as I have said before he and I when you do it to me are only writing exactly what Hitchens,Heffer,Mckinstry,Phillips,
Kelvin Mackenzie, and many others are writing ALL the time and as for Frederick Forsyth
and your ex colleague Anne Widdecombe,their language is even more robust,I have heard rumours that a book is being written by both in novel form that encapsulates what is going on and has been for these last 10 years at least,what are the then Word pictures of personalities with different names going to make the real ones look like ,of which NO
comeback will be possible as the books will have been LEGALLY proof read.
I fully support what you write and you are iMHO one of the few politicians on your side saying it as you do,but I implore you to allow us to say our piece without ED. because as I have said ,it IS said by others in the media.
November 11, 2011
I agree with most of your analysis about the state of Western government finances.
However, if you watched Question Time last night you can see both the Labour part and the majority of the British public are still living in Gordon Brown’s never never economics land. Every solution was more money and more staff.
Do you wonder why politicians have to lie to us?
November 11, 2011
I would never judge the public as a whole by the rabble that seem to end up in Question Time; they’re always loud to clap any suggestion that they should be given more money. The electorate as a wholly is slightly, just slightly, more sesnsible.
November 11, 2011
“the majority of the British public” you haven’t fallen for that one have you?
Most on this site have been innoculated against the BBC and its stratagems for grooming the public by making the majority view be seen as a minority rightwing, reactionary, racist cult.
November 11, 2011
Osborne’s plans for the economy are also part of the never never economics land. Firing large numbers of public sector employees doesn’t create high levels of economic growth, especially when you pay them redundancy packages, then rehire them.
November 11, 2011
As Greece is finding nobody wants to give them credit – even in the oil markets where Reuters has just found oil tankers coming in from Iran – because the Russians will no longer extend credit. With an EU sanction hanging over Greece, Iran is hoping for future bartering terms with Greece to be agreed in order to bust the sanctions. Thailand is already setting up a rice for oil agreement in advance of any sanctions. Oh dear is the Eu bringing a Nuclear Iran ever closer??
November 11, 2011
You mean a “Nuclear Iran” wink, wink?
November 11, 2011
Waltham Forest Council seem to have plenty of money to burn:
http://blogs.telegraph.co.uk/news/davidhughes/100106533/the-local-council-where-a-cardboard-box-costs-15000/
November 11, 2011
There is one expense that Europe will be keen to abolish.
It is almost certain that if a Country driven into the ground by EU poverty policy, (they call it austerity) were to have elections, we would see the emergence of Parties whose major policy initiative would be to ditch the Euro.
Barroso does not want any hint of democracy to stop him from finishing the job of totally wrecking the European economy, so we can expect legislation to delay or prevent elections in those countries which have EU puppet Governments.
Will Barroso provide us with a lucid explanation of how reducing your income helps you pay the bills?
Probably not.
Socialism thrives under conditions of poverty, as was carefully explained to me by a Labour Councillor in a Northern English town.
An impoverished Europe will be fertile ground for a resurgent Communist Party, and Barroso is, after all, an ex Communist.
November 11, 2011
Why would any party ditch the Euro when if means they’ll lose all their austerity from the EU?
Is it any surprise that where there’s high levels of poverty there’s high levels of support for a welfare state? If the Capitalisms don’t want Socialism they need to learn to temper their greed.
November 11, 2011
Are you referring to Labour’s favourite banker (Fred Goodwin)?
November 11, 2011
Apropos what I said about Frederick Forsyth and his writing,read his full page column in today’s Express it says it as it IS full stop,even look at Javelin’s comment above re Iranian oil
and Greece ,the Eu can expect this, MERKOZY LISTEN you idiots,I lived in South Africa from 1980 till 2008 [Apartheid till 1994] (some-ed) made MILLIONS sanctions busting OIL and guess where from? IRAN,and guess where THROUGH ? AMSTERDAM
bills of lading changed and every trick in the book,BUT every day there was a Tanker off the BLUFF [Durban] at the oil discharge point you couldn’t read the NAME or REGISTRATION
and even when you could I KNEW it was FAKE,and Apartheid sanctions busting was more serious than poor greece who are only EURO REBELS or will be,another question WHO sold nuclear technology to Iran could it be the same [xxxxans] as sold technology to
” weapons of mass destruction Saddam”.Good subject for another [Jackal like novel] ironic that they now could have an OIL for ? deal rather like the OIL for Medicine in Iraq,millions made there as well. When will the Gendarmerie/Gaulieters ever learn
November 11, 2011
What is so satisfying about Mr Redwood’s account of the present crisis is its simplicity- in effect people and countries have all been spending more than they can afford and have borrowed too much to make up the difference.
To read some accounts, it is all very complex and involved. It’s become muddled, but in its essence, it isn’t.
What helps with a concise account is that it helps to point the way to the solutions and they involve simple truths: that you can’t live long beyond your means and that if you can’t improve your means, you cut your expenditure.
It used to be that countries assumed they could increase income by further taxation or by boom-like stimulus. Things are so bad, neither will now produce further income. Leaving so-called austerity as the inevitable option.
November 11, 2011
Public service pay should be restricted to the PM salary. Including the BBC and other quangoes.
Pensions should be capped at 50k per annum. No payout above that regardless of any previous rules.
I bet that would solve most of our problems.
Anybody who objects can defect to the private sector.
November 11, 2011
As many people in the public sector constantly bang on about how critical they are to the well being of the private sector (education, health, infrastructure etc) why doesn’t the government say that, from now on (I don’t believe in retrospective legislation) , all public employees must invest in a private pension scheme?
This would include both employer (the state) and employee contributions.
This would have two beneficial effects.
1) Provide a greater incentive for the state to legislate / regulate effectively to avoid any “bailouts” (using current parlance).
2) Provide a greater incentive for the public sector to ensure that the private sector flourished.
November 11, 2011
It is always good to see the big picture because if you don’t you can focus on the wrong issue and a solution which ignores other important factors.
What has caused the extreme nature of the crisis (not the crisis itself) is the Eurozone’s inability to use sovereign power effectively. Whilst sounding eminently sensible not to sanction money printing in the Eurozone…cue Germanic efficiency, frugality etc etc (more on this in a minute)….It has actually left the Eurozone more open to attack, when in reality we could have been a better target. The PIGIS were clearly overspending, lacked growth, and could not use interest rates or monetary policy to iron out the bumps/buy time/come up with another approach. I suspect that they might have had an implicit promise that Germany would ride to the rescue. This is clearly not the case and will only happen when Germany gets some collateral….
On the point of Germanic frugality, history tells a different story…Weimar (1924 – 29) when Germany lived on tick paying out reparations from US loans, and we know what happened then. After WW2, the US made sure that the Germans wouldn’t suffer from high reparations, and Germany got the benefit of the doubt when it was given debt forgiveness by the US in 1953, and this helped sustain the ‘economic miracle’. Some European countries had to wait for their reparations…..In fact Germany has been quite fortunate and hasn’t paid back its reparations in full.
So, let’s not forget the historical context around Germany and ‘debt’. It does not have clean hands….I wonder if this might tip the balance and force the Germans to underwrite Europe as it has benefited so much from it in the long run?
zorro
November 11, 2011
I think itās helpful to step outside and see the really big picture to put recent events into context. How does the current āEconomic crisisā fit in with other radical changes we have observed in society in the last 40 years.
The supposed economic miracle of the last decade were everyone from Greek dustmen to Spanish property developers seemed to be getting richer has been exposed as a hollow sham – it was an illusion conjured up by cheap Chinese consumer goods,easy credit and massive government borrowing.
Mr Redwood sets out better than I ever can the consequences of governments overspending. But lets consider what is the underlying driving force behind this reckless action ?.
Incompetence.. (unlikely in my view given the breadth of expertise governments can call upon ) . Or is there a deeper motive other than bribing voters with borrowed money ?.
So now the dust is settling we can see more clearly how things really are.
Could a desire for a Socialist dictatorial state amongst European intellectual elites, inspired by the ideas of Marxism be the driving force?.
I think for too long this has been regarded as some kind of crank theory – I think it is time that the threat was taken much more seriously. The eagerness with which EU leaders are seeking to prop up the doomed EURO, at all costs , should set alarm bells ringing. I believe the time has come to confront this ideology head on- rather than attack the symptoms it causes.
Instead of the āDictatorship of the Proletariatā the ideal that was originally sought by Marxists, we are getting, by stealth – the dictatorship of the EU Commission.
The founders of Marxism hoped that by their actions they would āmake the West so corrupt that it stinksā . The stench of corruption and waste in the EU area is now so overpowering that the elites are fearful that the march towards an EU dictatorship led by France and Germany will be halted by the people.
We have already seen the Greek and Italian government yield to a fearfull EU commission in a desperate attempt to keep the project afloat.
Maybe others will follow.
Consider each of theses recommendations as set out by the founders of the āCultural revolutionā – and how strikingly relevant each one of them is today. Then consider how our involvement with the European Union furthers each of these causes.
Despite the rhetoric, these ideas have all been endorsed by all of our main political parties.
1. The creation of racism offences. (It has happened, race relations acts, and government promotion of Political Correctness and equality agendaās)
2. Continual change to create confusion (Constant changes to our relationship with the EU and mass migration guarantee this, culture of PC makes older people feel alienated in their own communities)
3. The teaching of sex and homosexuality to children (Even the Conservatives apologised for section 28 banning promotion)
4. The undermining of schoolsā and teachersā authority (by state departments and a powerful ārightsā culture without responsibilities)
5. Huge immigration to destroy identity.(It is actively promoted by the EU under the umbrella of the common market)
6. The promotion of excessive drinking (New Labourās 24hr rock around the clock drinking ?)
7. Emptying of churches
8. An unreliable legal system with bias against victims of crime (The view that the underlying cause of criminality is poverty and āunfairnessā is mainstream in British politics. The rights of the victim are routinely ignored.
9. Dependency on the state or state benefits (The British state ensures people are often better of not working. There is a perverse agenda around āfairnessā and arbitrarily defined measures of āpovertyā designed to shut down debate by implementing a blanket āprogressive consensusā
10. Control and dumbing down of media ( This has happened. The BBC has ādumbed downā considerably and isnāt free of political interference and bias.
11. Encouraging the breakdown of the family ( Incentives for single mothers, discouragement of marriage and commitment in the benefits system are endemic )
My view is that the ideas of Marxism endure in the hearts and minds of our political leaders to this day. It is no coincidence that the recommendations above are all being implemented – this should concern us all.
November 12, 2011
Thank you for enumerating the Fabian manifesto.
The BBC and Common Purpose are signed up to it, but have been reluctant to come out of the closet, so to speak.
November 12, 2011
Makes you think of Blackadder and General Melchett, you could just change a few words:
Melchett: Barosso, Sarkosy & Merkel have formulated a brilliant new tactical plan to ensure final victory in the field.
Blackadder: Ah. Would this brilliant plan involve us borrowing our way out of debt?
Captain Darling: How could you possibly know that, Blackadder? It’s classified information!
Blackadder: It’s the same plan that we used last time and the seventeen times before that.
Melchett: Exactly! And that is what is so brilliant about it! It will catch the watchful Markets totally off guard! Doing precisely what we’ve done eighteen times before is exactly the last thing they’ll expect us to do this time! There is, however, one small problem.
Blackadder: That everyone always ends up owing even more money and losing their sovereignty?
Melchett: That’s right. And David Cameron is worried this may be depressing the men a tad!
November 17, 2011
Mr Redwood,
“For many years now the west apart from Germany has decided to live beyond its means. It has imported its lifestyle from China and other emerging markets, and borrowed money to sustain the spending.”
Does having a large National Debt constitute living beyond it’s means?
http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt
National Debt:
UK 79.9 % of GDP
Cuba 34.3% of GDP
France 82.4% of GDP
Netherlands 62.9% of GDP
So German debt must be lower than this – inorder to justify your statement above?
German National Debt was 83.2 % of GDP – more thab that of the netherlands.
How do you define – “living byond it’s means” ? Exactly ?
The difference between Germany and the UK is that 98% of Money is invested in non-productive investment – Germans invest far more in productive enterprises.
Perhaps you should focus on that.
The way China creates it’s money through a National Bank – Rather than a Central Bank also affects how the economy behaves. Until you get the fundamentals of money creation – you are not going to do anyhting apart from deceive the ill informed. Or perhaps that is your intention.
Reply: You need to look at private sector debt and at the balance of payments deficit or surplus to make a fair comparison.