We’re entering the rapids
June 14th, 2010The prophets of doom are now lining up. The OECD, the Governor of the Bank of England and the G20 are now all cheerleading the drive for fiscal conservatism. Sir Alan Budd, the Head of the new Office of Budget Responsibility, is today announcing that UK economic growth is expected to be much less than Alistair Darling’s estimate of 3-3.5% in his last Budget, perhaps 2%, hence the greater need for big and immediate spending cuts. The idea that the most drastic public expenditure cuts for a generation are now necessary and inevitable has become the conventional wisdom. And it is wrong, wrong, wrong, as history demonstrates unmistakeably.
Roosevelt’s New Deal – i.e. doing what Cameron denounced last week as Labour’s “ratcheting up unaffordable government spending even when the economy was shrinking” – pulled the US economy out of the deepest hole for a century. But at the same time it increased US national debt by 65%. Re-elected into office in 1937 he bowed to the sound-money jeremiahs who inveighed against unaffordable deficits that would cripple future generations (just like today) and slashed public spending. Within a year, because of falling tax revenues, the deficit rose further still to a level 85% above the 1932 nadir.
The Second World War economic drive, superimposed on this policy bungle, changed the scene completely. The US ended the war with a deficit of 120% and the UK, drained its empire, with a deficit of 250%. But was either country crippled? Exactly the opposite, there was full employment, strong growth, the levels of national debt and budget deficits came tumbling down, and capitalism entered its heyday.
The OBR today estimates that the deficit is now £155bn, fractionally down on last year, of which about three-quarters, or nearly £120bn, is structural rather than cyclical. We are now informed that Osborne intends to eradicate this enormous total by public spending cuts and tax increases during this Parliament. In which case, where does he expect the growth to come from to prevent unemployment rising rapidly to 3 million or more and staying there for the next 5 years?
June 15th, 2010 at 9:41 am
GREAT post, Mr Meach MP!!!
How right you are! As the “Forum for Stable Currencies” we’ve been raising awareness about these issues since 1998.
But neither politicians nor journalists want to understand or think, let alone comprehend, it seems. They just follow “templated arguments” of ideology and belief, it appears.
Logic would be nicer. But then the bank(st)ers couldn’t win their game of seduction…
And thus we each need to follow our “moral compass”, hopefull eventually making a difference…
With best wishes for more and more power to your elbows,
Sabine
Organiser, Forum for Stable Currencies
http://forumforstablecurrencies.info
July 15th, 2010 at 6:16 pm
Very interesting…. I had some knowledge of this from previous research I have done.
In all studies published and peer reviewed that I have heard of, everytime a government has claimed it must cut the deficit by cutting public spending and increasing taxes, it has made the situation worse. Tax receipts went down as the rate went up. cuts means less jobs, means less tax revenue overall.
FDR, did not issue government money interest free in to the economy, he swapped some US treasury bonds (as good as money) for some ‘money’ from the private company, the “Federal Reserve Bank”.
But wait, where did the FED get the dosh???? Nowhere, they simply wrote the ammount in to existence in their ledgers…and loaned it to the US Federal Government at INTEREST.
A debt was created, to be repaid by the US Tax payer, which can never be fully paid off because in order to create “economic growth” the US governemnt and everyone else had to borrow more money in to existence to pay back the Interest on the debt to the private bank, the Federal reserve.
err – pyramid/ponzi scheme….hello!!!? anyone in government listening????
Anyone see any parallels with the UK economic mess??????? Look closely.