Tuesday, July 08, 2008

Living In Economic Cloud Cuckoo Land

We're living on borrowed time with borrowed money. Now there's confirmation of a looming recession and a £7.5 billion budget black hole. This is an accident waiting to happen after living for a decade in cloud cuckoo land.

Brown was spun as the 'prudent' chancellor. He was nothing of the sort. He helped create and rode on the back of the economic good times, with a false feel-good factor. 

For years, the government propped up an ailing economy by borrowing, keeping public spending off the books and  creating a consumer debt culture. 

A prudent house-keeper would have kept something back in the kitty for a rainy day. Instead this 'prudent' chancellor sold off most of the UK gold reserves at a knock-down price, leaving nothing to fall back on. We were riding along on the crest of a wave of false economic confidence.

Confidence is crucial. Consumer confidence makes everyone feel happy. Confidence in the economy created investment from abroad and placed the City at the centre of word trade. But this has been a false confidence. A confidence trick. 

House prices have been allowed to rocket and the house building industry has grown fat on the back of this. Now, with house prices crashing, there's no wonder house building is being hit. It should not have been allowed to happen in the first place.

For ten years, we've been encouraged to live off 'easy money'. Restrictions on borrowing were relaxed and few credit checks made. Everyone borrowed to prop up their lifestyle. The present credit crunch is a result of this. It's hard for government to accept, as it created the decade of debt culture in the first place.

For a decade the government has lived an illusion, living off borrowed money to prop up policies in education, health and crime. Billions of pounds have been wasted on massive IT projects, huge expensive quangos and flagship publicity projects. Then it didn't matter. The government just borrowed the cash, then fiddled the public account books with smoke and mirrors.

Manufacturing, once the backbone of UK economy, has been deliberately allowed to fall into decline, with the exception of pharmaceuticals, as the government switched to a policy of allowing imported cheap, low quality goods from abroad with dubious working practices. 

Companies were encouraged to cut costs and move manufacturing to China. They were enticed by savings. Now they and the consumers are disillusioned and disappointed by the quality. Cheap food comes from abroad to try to keep down inflation figures.

Public sector workers are demanding bigger pay rises to cope with rising costs. People want more in their pay packets to pay off the crippling loans, credit cards and mortgages and to cope with spiralling costs. 

Basics like milk, eggs, bread, fuel and gas electricity are going through the roof, yet inflation we are told is just  three percent.  Spun with a nifty little device called the Consumer Price Index.  Basically you decide what you want inflation to be and what is bearable in advance, then adjust the statistics with weightings to achieve the result.

We are not well placed to weather the economic storm. The only hope is  to wait for a dose of reality and realistic economic policies.


helen said...

I've never been a fan of Gordon brown and it looks like a lot of people are going to be in for some tough times in near future, if not already. I'm lucky that I only have a mortgage to contend with. People with loans, credit cards and a mortgage must be in a real panic and there seems no end in sight in terms of rising fuel, food and energy costs. The reality is that the lest fortunate will loose everything they have tried to achieve and the wealthy will feel little impact from the dark years ahead.

Gordon said...

And , of course, it's all our fault for listening to the same bankers who advise government.
For 300 years bankers have conned government into debt.
Now the debt is spreading to the people and really hurting.
This is simply because of the debt-based money supply (really creation) system which can only lead to more debt.
Truly great men have tried to halt this slide into debt-slavery, including Presidents Lincoln (assassinated for it), Andrew Jackson (his proudest achievment was "I killed the (private central)bank") and JFK (see Executive Order 11110, then assassinated).
We need an honest, fiat money supply system owned by the people and run for the benefit of all.
It is not people that need reforming, it is money.

Adrian P said...

The Money Masters