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We are enduring the worst period of recession and stagnation in a century and the Governor of the Bank of England believes it will last for at least another five years. The British economy will have suffered a lost decade, 10 years of declining living standards during which the savings and the capital of the country are gradually whittled away.
Despite our appalling plight, the level of economic debate is lamentable. Politicians chant “austerity” and “growth” at each other like kids in a playground, more concerned with buying votes than fixing the economy. But when the Prime Minister, Deputy Prime Minister and even the Chancellor get confused about the vital difference between the country’s total “debt” and the annual “deficit”, is it really surprising?
Since the recession began, all the old Keynesian pony tricks that supposedly ginger up an economy have been tried – and some new ones. The government has “injected” over £500 billion in fiscal stimulus (spending more than its income), bank base rate has been at the record low of 0.5%, the pound is heavily weaker, £375 billion new money has been electronically created through Quantitative Easing and the Bank of England is force-feeding the banks cheap money through its Funding for Lending Scheme.
What good has it all done? Despite the recent tick up in GDP, the economy is only back to last year’s level and has not even recovered half its loss since the crisis began. It may be enjoyable to blame the bankers. But they were abetted by politicians, regulators and central bankers, all colluding in puffing up illusory economic growth, inflating a debt bubble that has yet to burst. Even now, we remain the most indebted of all major Western nations. According to McKinsey, total UK debt amounts to five times our national income.
And yet every proposed “solution” involves taking on still more debt; more government borrowing, more mortgages, more on the magic plastic cards. If only we borrow more and spend more, somehow everything will magically be allright. Piffle! Diagnose an illness wrongly and it does not matter how much medicine you stuff down the patient’s throat. Not only will they not get better, they will actually get sicker.
That’s why Save Our Savers, The Adam Smith Institute and The Cobden Centre have produced a clear, jargon-free guide called “What’s Wrong With The Economy?” . It sets out to explain why we’re in such a mess with, at the root of our problems, the Stalinist Bank of England. From there nine ivory-tower theoretical economists dictate the price of money, much as Soviet Russia determined the price of shoes or bread, similarly distorting the free workings of the market. This is no longer a true free market economy but a bastardised crony form of capitalism under which the country’s savings – the necessary capital of capitalism – are being stolen by stealth instead of being used to ensure future growth.
We are experiencing the early stages of financial repression. As the economic situation continues to stagnate or deteriorate, it will become ever more severe. And with it will surely come the losses of many other freedoms. In Europe, capital controls are making a comeback while the idea of prohibiting individuals from holding gold has been mooted.
If the economic news you read in your paper every day makes no sense, it may be for a good reason. We live in a weird Alice in Wonderland world and we need a dose of sanity. We need to remember that the government has no money except what it takes from its citizens. We need to remind ourselves how wealth is created in the first place. We need to understand that problems caused by an overabundance of debt cannot possibly be solved by taking on yet more debt.
It is time to challenge the blinkered, misguided orthodoxy that got us into this mess in the first place.
- Freedom in the City on 22nd May with JP Floru on May 22, 2013 12:30 pm
- The Freedom Association’s Magna Carta Pimms and Politics Cruise on June 15, 2013 12:30 pm
- Conservative Renewal Conference on September 14, 2013
- The Freedom Zone on September 30, 2013
- The Freedom Zone on October 1, 2013
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