PostHeaderIcon UK Election, Final debate is on the economy. Will Gordon Brown answer these points?

The United Kingdom is facing the worst financial crisis in its history.

This is all about debt. Not just Government debt but Corporate debt and Consumer debt. By any accounting standard, they are all at nightmare proportions.

The last 12 years have seen an economy built, not on genuine growth in productivity, but on a Consumer spending boom that was financed by massive asset inflation and equity borrowing. All of this was made possible by cheap money from worldwide markets.

When this dried up, the asset bubble was exposed and the banks stood to make ruinous losses that would have decimated our economy along with many others. So we bailed out the banks with taxpayer-funded guarantees and all but nationalised them.

To use the analogy of a household that has massively over-borrowed; rather than go bankrupt, we took out a gigantic consolidation loan. This hasn’t cured the problem, it has merely deferred it to a later time.

So we have a situation of a fantasy economy. Asset values have been artificially protected from the reality of the market place. A reasonable mark-down of all affected asset values would be in the region of at least 40% from their current levels. So we’re talking losses running into trillions of pounds.

In the meantime, the BOE is printing money to buy Government Bonds so that we’re able to keep up interest payments on our massive borrowing which is increasing day by day. Desperate to stimulate consumer demand, interest rates have been slashed to 0.5% to enable homeowners to keep paying their mortgages and keep defaults as low as possible.

The banks, desperate to rebuild their balance sheets, are charging a premium on their mortgage products which is depressing the very stimulus effect that the BOE’s interest rate cuts were designed to promote.

One thing is for certain, there is no way we are going to borrow our way out of this mess.

Then there is taxation and Government spending. Taxation at its present level is far too high. It is siphoning so much money out of the real economy that the vast majority of households have little or no funds for discretionary spending. This is further depressing the economy resulting in job losses, hours cut back and downward pressure on wage inflation. This, in turn, reduces the tax take and puts additional burdens on the Exchequer with higher welfare payments and entitlements which increases the amount of money that the Government has to borrow.

Outside economic forces are not helping. The UKs balance of trade figures are truly appalling. Invisible earnings, normally the salvation of our B.o.T figures, has been dramatically hit by this crisis. For a long time now, we have been a net importer of manufactured goods from overseas. That’s even more pronounced now. But with North Sea Oil and Gas running out, we are becoming net importers of energy as well and this is reflected in higher petrol and diesel costs and higher prices on electricity and gas.

Once again, the UK consumer is bearing the brunt of all this which is further depressing the economy while inflationary pressure on prices is increasing.

Now let’s look at jobs:

The Public Sector, for the most part, has been spared the job cuts it has coming but, rest-assured, they are coming. By my reckoning, at least 30% over the next 3 years.
The shake-out in the private sector hasn’t even started yet. Most employers have been willing to take the hit of keeping their employees on because they’re hoping for a re-bound in consumer confidence and spending. We’ve already seen how unrealistic that scenario is.

Last Monday (February 14th), we learned that the number of economically inactive people of working age has hit an all-time high of 8.08 million.

The number of under-employed and part-time workers has hit 7.69 million.

All these people qualify for State-funded support of one type or another. To say nothing of the social cost that is taking its toll on families and communities right across this Country.

This leaves 21.2 million people in full-time employment, but if you break that down you will find a significant percentage are working on one year contracts and around 4 million are working for the public sector. Make no mistake, our Country is sitting on a knife-edge.

Now let’s look at Treaties, regulation, laws and administrative burdens. In our global economy, every negotiation to implement a Treaty requires compromise and dilution of Sovereignty. Each Country seeks to uphold certain self interests and cedes other interests to arrive at a negotiated settlement.

The UK has done that with Europe, Nato, the UN, G7, G20 and many other agreements. This, in turn, has led to the imposition of regulations that govern many aspects of our economy, our criminal and civil laws, environment and trade. The consequent administrative burdens that we, as a nation, now face is so complex that even a minor policy change will require massive scr

2 Responses to “UK Election, Final debate is on the economy. Will Gordon Brown answer these points?”

  • Elmbeard says:

    I was just getting into my stride with this lengthy and largely accurate essay into our predicament when the character count cut us off!

    I am sure Gordon Brown, along with leaders and treasury spokesmen from all the other parties, is well aware of all this. None of them really have the answer, and certainly nothing that could be got across in a 20-second soundbite and still remain electable.

    When folk run out of money to pay the ever-rising Council Tax bill, then in come the bailiffs. I worked for a Council legal section where the duty solicitor took a malicious pleasure in the tone of fear in the voice of some Gladys, Edith or Doris who were facing the removal of their possessions to meet outstanding care payments. How far we will go down this road toward Mugabe style of redistribution remains to be seen. It all depends just what democracy will be forced to tolerate. It all depends how long the “I’m all right, Jack” element of our electorate holds the majority.

    The answer? I am planting ash trees as fast as I can. At least in 15 years I will have a supply of heating materials. Sooner or later, when the money runs out or becomes meaningless, I will need a shotgun and a large dog to see off the Council bailiffs, and a network of tunnels so that when they come looking for me, it will be the devil’s own job to find me, and they can pick on someone easier.

  • harrison.nicholas says:

    forget labour forget gordon brown they let us down putting tax up closing post offices and shops you really want to vote vote lib Dem’s they rule

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