Friday, February 27, 2009

Ten years after

I’m not going to pretend that I know what’s going to happen during this current economic crisis, but I have my suspicions and I’m pretty sure that it is far worse than we are being led to believe. This latest report suggests that I'm more likely to be right than wrong.

Without going into the reasons for it once more, as far as I can see the conditions today are almost exactly as they were prior to the Great Depression – except worse. We’ve enjoyed a recent prolonged prosperous spell but it was a false prosperity built on an illusion supported by an enormous debt burden – not just personal and corporate debt, but national debt as well.

Gordon Brown and his like are pinning all their hopes on getting through this by governments buying up the debt, which would have been quite possible if this was a localised rather than a globalised problem. The debt burden is just too huge this time.

The belief that governments can just “buy” the debt from lenders is misplaced. First of all, the government can only buy that debt if they raise the money somehow – that means raising the money through tax revenue or borrowing money from lenders somewhere - which requires that there are lenders out there prepared to lend money and that they believe the government is good for the debt. Lenders lend money to governments by buying government bonds – the belief being that this is risk-free as governments can always raise the money by either raising taxation or printing more money.

However, this will not work this time for the same reason it failed to work in 1929. The government can not raise money through taxation because there will be fewer people earning and lower company profits. Government will be having to raise taxation if they just want to maintain their current level of tax revenue - and chances are they won't be able to do even that.

Furthermore, the lenders will be working to reduce the amount of personal debt they hold – which is massive. This will mean that they will be doing whatever they can to “call” that debt in leading to more bankruptcies, more repossessions and a massive shrinking of credit availability. That will mean less spending and, of course, less tax revenue.

You will also see those people who have money – in savings and so on – less inclined to leave that money with the banks; partly because they are seeing no return on it and partly because of the fear that the bank will collapse. Those people with debt will also look to find ways to keep their money out of the hands of their creditors. Hoarding money will become common place once more just as it did in the early thirties.

Another option for governments is to apply “quantitative easing” – printing money. This can work in the short term when the global financial system is relatively stable, but when it is not it can be dangerous. When coupled with a massive national debt it can be catastrophic leading to hyperinflation and resulting in government bonds being worthless. When that point is reached you are out of options. All you can do is keep printing money until it is worth less than the paper it is printed on.

So if you can not raise the money through taxation and if printing money is only going to make things worse, what can you do?

The third option – and the only one realistically available to us – is to massively reduce public spending. Not only must we reduce what we spend, but what we do spend has to produce something – something that we can sell or which raises revenue in some way. Although our public spending as a percentage of GDP is not much different from what is was 30 years ago you have to bear in mind that the way we spend that money is vastly different. Back then we were spending it on digging coal, making steel, producing ships, planes, cars and so on.

Although those industries were not necessarily making profits, they were bringing in revenue – internal and external (through exports) so the cost of the public sector was vastly reduced by the revenue it brought in. Things are vastly different today. Our public sector does not produce anything – it is 100% cost - and reducing that cost has to be the priority of any government. However, the whole of Europe is currently in the grip of a particular political doctrine called progressive liberalism – and Britain as much as anyone.

Progressive liberalism is built on the principles of the client state the aim of which is to create a state on which every individual is dependent. This is done by less obvious means – such as tax credits and so on so that even those in the private sector are reliant on the state to some degree – but more obviously by tying more people to the state by having them employed by the state and through welfare.

I'm not sure what the percentage of people on welfare are, but it is considerable. With around 30% of our workforce (a conservative estimate) now directly employed by the state the idea of reducing that massive cost leaves the government paralysed with fear on two fronts.

The first of those fronts is the fear that it will mean putting literally millions of people onto the dole queue. This is cheaper than employing them directly, but it also leads to unrest and discontent with the government. The same with cutting back on welfare. The second fear is that it undermines the progressive liberal ideals of the client state.

We are due to have a General Election sometime in the next 16 months or so. It doesn’t matter whether that election is won by the Tories or Labour – it will not make any difference to the way we are heading right now. There is nothing that any of our current mainstream political parties could do – or rather would do – that will change the course that they have set us on because they are all hell bent on the progressive liberal agenda. Whoever does win that election will have no more than two years, at most, before it becomes apparent that public spending has to be slashed immediately and massively.

I realise that this all sounds deeply depressing - and in many ways it is. Things are going to be very tough for a very long time for an awful lot of people all over the world - and here in Britain as much as anywhere. For most of us, we can forget about all the material things we've become used to over the last couple of decades - the easy credit, the new car every two years, the foreign holidays in Florida and Thailand. Everything will change - massively and decisively.

However, there will be a lot of positives too. Progressive liberalism will be dead and buried, the EU will collapse and Britain will emerge as a stronger, more self-reliant and self-sufficient nation once more. We will revert to being a conservative - socially and politically - nation once again, governed both morally and politically by conservative principles as individuals and as a nation.

As a traditionalist and a nationalist I welcome this - I just would rather we didn't have to go through the hell of the next ten years or so to achieve it.

Oh, one more thing. Remember - we are British. We do do nationalism, but we do not do extremism. Unfortunately, that can not be said of other nations.


Anonymous said...

Ten Years After?...Ric Lake lives near me.

Stan said...

LOL - the original post title was ten years gone, but I thought I'd get inundated with hits from Led Zep fans so I changed it.

bernard said...

Another point worth the mention on the 1930s Depression, and this coming one is: The population of the US in 1930 was 122 million. It's now 300 million, so we have the 'economies of scale' to contend with.
In fact the whole Western sphere has more than doubled it's population, which adds to the magnitude & sweep of the disaster should this replicate the 1930s.

Sal said...

We're going through the same situation here in the states. Let's hope both the U.K. and the U.S. come out stronger after the ultimate collapse of the socialist-democratic experiment.