Successive UK governments clearly believe that running up a huge debt is an intelligent way to run an economy. Even individuals with a minimal grasp of finances recognise that it is best to save, then spend. It is very expensive to borrow one’s own earnings from the future, as the Greeks are demonstrating now. The UK has an old economy, it has no reason to have any debts, in fact it should have savings. Unforeseeable events like war to defend ourselves and huge natural disasters are examples of very few exceptions that cannot be planned for and may justify borrowing.
The root of this problem is that politicians have their own agendas that involve making themselves look clever. Ex-PM Gordon Brown had the audacity to repeatedly claim prudence as his watchword, while running up enormous debts. The political system of government will always be prone to this kind of folly, because it concentrates power into hierarchical structures and people are inherently unable to reasonably use such levels of influence. It is clear that a non-hierarchical influence structure free from politics is an essential prerequisite for an acceptable form of government.
This general election has exchanged one group of self-serving incompetents for another. It will not substantially advantage the UK. The new government represents more of the same, with a slightly different set of ill-conceived policies and priorities.
Archive for the ‘debt’ Category
Stupid economics
Saturday, May 8th, 2010Misdirected Spending
Monday, March 1st, 2010It is easy to look successful when one is spending someone else’s money, especially when one can also spend what they have yet to earn. Regardless of the sanity of that government policy, it is misusing the revenue from current and future taxation. Government spending is poorly directed toward encouraging retail spending and funding a bloated, overpaid, and inefficient public sector.
As much of what we purchase comes from other countries, some of that money flows out of the country and so retail spending is not good value for money. The public sector is notoriously bad value for money and some of it is not involved in fulfilling needs and wants. The public sector is funded by the private sector and so it should reflect the ability of the private sector to pay for it. Savings from downscaling the public sector should be redirected to stimulate the private sector. The most direct way would be to reduce costs to operate businesses, especially in employing people. This could include suspending the minimum wage and many other employment rights that discourage companies from employing people. While infrastructure projects improve the short term prospects of some companies, their total value is spread over a long period, so they do not achieve the best immediate effects.
Encouraging already highly indebted people to spend more on products that worsen the balance of payments, and using their future earnings to do so is not a sane policy. It seems the obvious needs to be stated, debt is not good. In broad terms, the reason we have problems now is because of excessive debt being used to inflate asset bubbles and the lack of confidence in the ability to service those debts. We need to deflate those asset bubbles, reduce debt, and diminish the chances of both recurring in the future. Policy needs to recognise the basic human traits of greed and hubris to restrain those that succumb to them. Free markets will always allow some to take advantage of others. They enable high wealth disparity which leads to a range of problems.
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Update 2010-03-09
Confirmation from the Office for National Statistics via the BBC that encouraging spending is not the panacea.
Financial mismanagement
Friday, November 20th, 2009This massive public spending binge is not free. The commensurate massive increase in public debt will have to be paid for with future taxation and spending cuts.
The £200bn of extra money being printed also has consequences. It will increase inflation which will make our diminished and stagnating salaries worth much less in real terms.
The current government is demonstrating breathtaking recklessness and incompetence with the financial health of the UK. They are using short-term tactics to try and minimise the financial problems they are complicit in, on the run-up to the general election. They hope that the general publics’ lack of financial acumen to spot this will allow them to keep those coveted well paid jobs with the massive financial gift that they call expenses and so very obviously adore above all else.
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Political economics
Monday, May 17th, 2010Today the FTSE 100 closed at more or less the midpoint between its all-time high at the end of 1999 and its lowest point in 15 years. As the economic outlook is not too rosy for the short term, which way will the market be going from here? Well there are bound to be some purple patches, but downward would seem like a reasonable bet. This is a disaster for workers and their dependents, school leavers, those leaving university, savers, those coming up to retirement, and those depending upon interest for retirement income. In fact it is not good for anyone. I recall some rubbish talked about preventing a return to a boom and bust economy. The trouble is that hot air came from Gordon Brown, who can now settle into comfortable retirement at the nations expense, along with that other money grabber Tony Blair and their friends. Through incompetence and self-interest these people made fools out of the people of this country. I am amazed that anyone voted for them at the last election. I suspect they have done more to create a class of takers than any politician before them. Massive debt, the hugely privileged useless public sector, and pointless wars are their legacy. Let no one forget it.
Naturally, those people who created this economic disaster will not have to worry about money. They have awarded themselves nice big indexed link pensions for life, as well as a nice exit bonus for their trouble. And we should not forget the large amounts they decided they should help themselves to, for just about anything they wanted really. Do I have much confidence the new lot of self-serving fools will do any better for us. No! Until we get rid of politicians we will always be destined to repeat this folly.
Tags: boom and bust, debt, economy, Fools, FTSE100, public sector, retirement, self-serving, war
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