When will Labour force a crisis vote on the economy in the Commons?
January 28th, 2013It seems almost unbelievable that the UK economy is still 3.5% below its level 5 years after the financial crisis began, when the US, Germany, France and almost all other major countries are now well above their pre-recession level, and that the UK economy has now contracted in 4 of the last 5 quarters and is very likely entering an unprecedented triple-dip plus loss of Osborne’s prized triple A credit status, yet all this and the latest -0.3% contraction passes with nothing more than comments from Ed Balls. When is the storm of anger and mobilised street protest going to break, to harness public opinion nationwide against an economic policy that is not only harsh and callous, but doomed – and the IMF, credit rating agencies, CBI, BCC and the Federation of Small Businesses all know it’s doomed?
It is genuinely hard to understand how Osborne’s dead-end policy when there is no apparent way by which it is possible that it could succeed, and when in terms of its central objective of reducing Britain’s debt and budlet deficit it is actually going backwards. Britain’s indebtedness has grown by £300bn in the last two and a half years because stagnation has shrunk government tax receipts and the deficit has consequentially grown by £237bn to service rising debt. When nobody, even Osborne himself, can plausibly suggest how this steady slide into endless austerity is going to be reversed, how conceivably does this policy survive?
What is extraordinary is that every supply-side device – interest rates on the floor at 0.5%, printing money (quantitative easing) at the staggering level of £375bn, throwing money at the banks through Funding for Lending (which the banks don’t then do), and Treasury guarantees to underpin infrastructure investment – have all been triumphantly touted only in the event to turn to dust. The one thing Osborne will not under any circumstances do is the one thing that will actually produce growth, that is recognise that Britain’s fundamental problem is not a supply-side one at all, but a demand-side management issue. It is really incredible that Osborne is being allowed to put Britain through all this agony because of this ideological dogma, yet Labour is almost quiescent about it.
So why is Osborne so fixated on supply-side solutions to the absolute exclusion of any demand-side intervention? It’s because the basic motivation of this Tory government is shrinking the State, privatising all services, and squeezing the public sector. The government’s expressed view is, the role for the State is to get out of the way and leave it all to the market and the private sector. It is this insanely tenacious clinging to this irrational ideology that lies at the bottom of Britain’s disastrous predicament. So why doesn’t Labour use this to hammer the government into the ground?
January 28th, 2013 at 2:57 pm
The ConDems have added £700billion to the national debt since they came to power.That is more than Tony Blair and Gordon Brown borrowed in 11 years. That is more than all the previous governments of the last 100 years put together. It remains to be seen if the government can pay off it’s debts without defaulting.
January 28th, 2013 at 6:37 pm
The UK government can never default because it issues its own currency unlike the Eurozone countries which use a foreign currency, the Euro.
Why doesn’t Labour say that Osborne’s rationale is bonkers? Why do the LP talk about the need for austerity? Ed Balls must know that the UK is not revenue-constrained.. even Mervyn King has said it!
Furthermore, £375bn QE has effectively reduced the debt by the same amount. It is just a pretense that those gilts will be re-sold, it would crash the market. Why doesn’t Ed Balls call Osborne’s bluff?
January 28th, 2013 at 7:55 pm
Every time the Government uses QE the pound is devalued as are peoples savings. We will end up like the Weimar Republic, taking our wages home in a wheelbarrow. Countries are getting out of paper money and going into gold. Germany has asked for it’s gold held in the USA to be sent back home.
January 31st, 2013 at 11:56 pm
Roger,
“Every time the Government uses QE the pound is devalued as are peoples savings”
You are half right. Peoples savings have been being devalued in terms of Asset Prices – like Houes, Commodities and Stocks. But it wasn’t QE that is to blame.
QE “Money” is Central Bank Money and goes to Private Banks Central Bank Accounts. We cannot spend it so that it will not inflate prices by itself. We are only able to spend Commercial Bank Money, which has been expanding rapidly for the last 40 years. In 1968 the Reserve Requirement for Banks was 20.5%. That meant that Banks could not create new credit once their reserves dropped down to 20.5% without borrowing more from other Banks or asking the Central Bank to create more Central Bank Money. Now the Reserve Requirement is ZERO percent. There is no limit to the amount a Commerical Bank can create new Credit. This is why House Prices went into a Bubble because of new Banks mainly lent to people into the Housing Sector and not the Business or Productive Sectors. QE is a parachute slowing the descent of a collapsing Money Supply. Mervyn King has stated this. Mark Carney will do the same because it is the only thing he can do, make the crash slightly less painful.
Private Banks Inflate wealth away – not the Central Banks. Central Banks are mainly to protect and bailout Private Banks, so they are still part of the problem but not in the way you think.
I agree with your comment about Gold. It is interesting that Germany has asked for it’s Gold Back.
February 1st, 2013 at 12:03 am
David Cameron said in a Political Broadcast:
“So though this government has had to make some difficult decisions, we are making progress. We’re paying down Britain’s debts.”
The National Debt is actually going up. What he forgot to mention is that Government Debt has to go up in order to avoid another Great Depression, as Private Debt is even greater than public debt.
If we pay down our debt, the “Money” supply shrinks causing more lack of liquidity.
Is David Cameron just ignorant or can we prosecute him for fraudulent claims?
February 1st, 2013 at 12:06 am
Is David Cameron technically telling the Truth when he says we’re paying down Britain’s debts. does he mean that the national debt is reducing in real terms as the Pound devalues? Wealth from peoples savings is being sucked into the vortex of the National Debt using inflation, which is why QE is needed to help the confidentce of Private Protected Bankers?
February 1st, 2013 at 12:13 am
Roger,
Partly agree with regarding people’s savings in relation to Pensions and Annuity rates as QE has reduced Annuity Rates meaning Pensioners are having wealth taken away from them.
The problem is a Systemic Fault which allows Private Banks to create 97% of our money, while 92% of Bank Lending goes into non-productive Asset Price Speculation. Only 8% goes into Businesses for creating productive employment. The Bank of England have stated in their reports that SME Lending has reduced over the last 40 years. Casino Style Finance has taken over.