#48. A world without trousers?

Considered logically, a capitalist economy which offers zero returns on capital is a contradiction in terms. Businesses add value when – and only when – returns on investment exceed the cost of capital. Reducing interest rates to zero makes a nonsense of any such rational equation.

Pursuing this thought just a little further suggests that reducing interest rates to zero – let alone turning them negative – amounts to the abdication of the capitalist system. Capital is consumption foregone or, rather, is consumption today surrendered, in return for enhanced consumption later. To render saving pointless is to slam the gates on capital formation. How on earth have we reached a situation where returns on debt capital have disappeared, and even the risk-premium return on equity has become derisory? Is the age of investment over? If so, can capitalism still be said to exist?

Of course, the official view would be that the Age of ZIRP (zero interest rate policy) is a temporary intermission, and normal service will in due course be restored. Perhaps, but this has already become rather a long intermission. The economy will, we are assured, one day become sufficiently prosperous to service its own debts, and thus restore incentives for saving and investment – but for how much longer can a supposedly capitalist system continue in the absence of returns on capital?

If, like me, you believe that the economy is fundamentally a surplus energy equation, and that an age of cheap energy and easy growth is drawing to a close, it will seem perfectly logical that we are on the cusp of profound change, not just in economic affairs but in society and politics too – after all, economic transformation almost always revolutionises society as well.

Even if, on the other hand, you are a “cornucopian” – a believer in perpetual abundance – I think you would have to accept that something profound and disturbing is happening, not least because debt continues to grow much more rapidly than economic output.

However you look at it, growth has become hard to find, and there is something distinctly unorthodox about an economy in which interest rates have been locked at close to zero for a very extended period, with still, it seems, no end in sight. After all, interest is supposed to incentivise saving and the formation of capital, as well as acting as a disincentive to excessive borrowing, so it is hard to see how a debt-based economic system can be sustainable in a zero-interest environment.

This has set me wondering about the viability of an economic model whose very foundation has become consumption funded by borrowing, yet which cannot afford to pay lenders any rate of return at all.

As I’m sure you know, the Islamic faith imposes an outright prohibition on lending for interest, which is known as “usury”. You might not know, however, that the prohibition on usury is just as strong in Christianity as it is in Islam. Jesus was not prone to taking violent action, but even He overturned the tables of the money-lenders in the Temple.

For much of recorded history, usury simply wasn’t allowed. Indeed, in England, until the time of Henry VIII, usury was punishable by death. Henry may have removed the death penalty – except where interest exceeded 10% per annum – but it remained impossible to enforce debt obligations in law. If you lent money to someone, and he refused to repay it, that was your problem, and there could be no recourse to the courts.

Though this situation changed long ago, today’s “anything goes” attitude to debt is a comparatively recent innovation. Credit controls were in widespread use until the 1980s, whilst the ability to enforce international debt obligations is a post-1945 phenomenon.

One problem with debt, you see, is that it hands to the lender power over the borrower. Should international institutions really be allowed to force third world borrowers to divert resources from education and health, simply in order to keep paying interest to affluent Western creditors? Should the need to service debts be allowed to transform a country’s agriculture from the delivery of food to the production of exportable cash crops, again just to please foreign lenders? More fundamentally, should the owners of capital be given a right to levy tribute on the poor?

In a world in which indebtedness has become the norm, these may seem strange questions, but I believe that these very questions are likely to be posed with ever greater urgency as the next economic chapter opens. As recently as the 1970s, the debtors tended to be the poor countries of the global South, whilst the prosperous Western economies were the creditors. Back in 1945, the United States was the world’s biggest creditor, and most European nations were big creditors too.

All of that has changed, basically on the back of two fundamental shifts in the global economy. For a start, the West became far more relaxed about debt, and deregulated lending whilst also stripping away capital controls.

This was compounded by globalisation, which I’m not alone in regarding as a gigantic heist. The logic of globalisation was and is that, whilst the West would offshore production to the cheapest locations, it would sustain (and indeed increase) its propensity to consume. As high-skilled, well-paid jobs disappeared, and were replaced by lower-paid service jobs, access to borrowing was made easy, simply because consumption could not be sustained in any other way.

If you have read Life After Growth, you’ll know that I devoted a whole chapter to the globalisation folly, showing how, in the United States, output saleable on global markets has been displaced by output that Americans can sell only to other Americans, and how this process has paralleled an explosion in levels of indebtedness.

By the early years of this century, borrowing had become the norm, not just for third world governments but for the majority of Western households as well. Two vast and hugely profitable networks have been created to promote the logic of borrowed consumption – global finance is one of these, of course, and the advertising industry, in its role as propagandist-in-chief for consumerism, is the other.

I doubt if I’m alone in recognising lending and advertising as the principal tools of the corporatist system, a system whose sheer resources enable it to bend governments to its will. This cannot, realistically, be changed politically, certainly unless we can block all of the “revolving doors” between government and big business. The likelihood of political activity undermining the corporatist behemoth is pretty remote, since the corporatists hold almost all of the aces.

Instead, it seems far likelier that the corporatist edifice will be brought down by its own internal contradictions. Thus seen, the current state of the global economy is highly instructive. The combination of consumerism and easy borrowing has mired the world in debts of a scale that, in the absence of super-robust growth, simply cannot be serviced (let alone repaid). The only feasible response to this was – and has been – ZIRP, but even this has failed to revive growth to anywhere near the levels that the corporatist-consumerist system requires. Latterly, we have seen a global recourse to “monetary activism” as a desperate – and final? – attempt to keep the system from toppling over.

I’m not saying we haven’t been here before, because I think we have – or, at least, France has. By 1789, the French state was bankrupt, government was hopelessly corrupt, rentiers ruled the roost and the advertisers’ motto seems to have been “let them eat brioche”. Is there something increasing familiar about this?

The revolutionaries were dismissed by the defenders of the old order as “sans-culottes”, which loosely translates as “people too poor to own trousers”.

If belts have to be tightened any further, we may need to remember that it was the trouser-less who triumphed in the end.

25 thoughts on “#48. A world without trousers?

  1. http://www.monbiot.com/2015/03/25/3703/

    Very astute commentary, Tim
    I’m fully on side, as you know. This blog by George says a lot about just how dire we stand today.
    That 6″ of ground is all we have between life and our extinction.
    We are doing exactly what it takes to be like every other extinction event. Burn full blast until we have on fuel left. We began this descent in 1971, by firstly overshooting sustainable consumption and by turbocharging it with credit money creation after Nixon took the USA off the gold standard. Mind you he had to do that because events had overtaken the old norms.
    Decline and fall is only going to accelerate. We will never be free of deflation from now on.
    Zirp is just a symptom. Widening the gap between the rich and poor even encompasses the middle classes now. so there are going to be a lot more of the population without trousers, even without food, which is where we are inexorably headed, and made obvious by our soils.

    • Thank you for raising the scary soil situation, something I touched on in my book. As I see it there are a series of trend-lines all pointing the same way – these include climate and environmental degradation, inequality, debt, “funny money”, reckless consumerism and the ending of the capability for growth. Will this lot shock us out of complacency and irresponsibility? I wish I knew……

  2. Hi Tim,

    I just caught wind of Yellen’s recent statement, “cash is not a very convenient store of value.”

    link here: http://www.zerohedge.com/news/2015-03-27/santelli-stunned-janet-yellen-admits-cash-not-store-value?page=1

    What she seems confused about is people’s reluctance to spend money in a world of negative interest rates. Bear in mind that Central Bankers want this magical 2% inflation and will stop at nothing to get it – even eroding people’s store of labour. I find it incredulous that she can even come out and say this, “no matter what you do, we’re going to rob you.” Just shows how brazen they’ve become.

    So the theory goes, we will take away all of your safe havens to preserve this mythical beast called ‘an economy’. A transition is definitely afoot. Where the economy once served the people through the distribution of goods and services, people now serve the economy to generate this magical 2% inflation target. I have another word, ‘criminal’.

    Does forcing people to spend in the near-term actually generate long-term, sustainable growth? What will they spend in the future? Oh, that’s right, that’s how we got here in the first place.

    Muppets.

    All the best,
    Luke

    • Thanks – I hadn’t picked up on that, but I’m not too surprised.

      My view is that the US and the UK have long been following a disastrous economic path – disastrous, that is, for everyone except the ultra-rich elite that runs the show. The destruction of the middle class is an implicit consequence of these policies.

      In the US, the key policies have been (i) globalisation, and (ii) debt-funded consumption. Globalisation reduces real wages, especially in the area of skilled labour, where jobs are exported to reduce costs. (This is where the middle class is hit harder than other groups). At the same time, the only way to sustain consumption, if real wages are falling, is to promote borrowing. Likewise, a low-wage economy is a low-tax economy, especially if corporate taxes are reduced, year after year after year, meaning that government, just like the consumer, has to resort increasingly to borrowing.

      Now in this situation inflation is essential, because it reduces the real value of debt (thus, of course, stealing value from lenders). It also, through “fiscal drag”, tweaks tax revenues up a bit. But what it does most of all is confiscate value from the public who have (because there is no choice) placed their faith in fiat money. Of course, it takes value away from the wealthy, too, but this can be more than offset by using QE to inflate capital markets. Likewise, bond markets are boosted, and ordinary savers plundered, by ZIRP.

      The British situation is even worse – because much so consumption is funded by asset-stripping and by borrowing from abroad – but the US position is hardly any more sustainable.

  3. Hi Tim

    Have you ever read “The Consumer Society: Myths and Structures” by Jean Baudrillard and also his critique of Marxism “The Mirror of Production”?

    You can read some selected extracts at the link below. Consumer Society starts on page 33.

    http://www.humanities.uci.edu/mposter/books/Baudrillard,%20Jean%20-%20Selected%20Writings_ok.pdf

    The consumer society is the more accessible of the two texts and it is startling how writing in 1968 (it was first published in English in 1970) he so fully understands his own era and anticipates our contemporary times. He develops themes and concerns raised by John Kenneth Galbraith if that helps situate it for you. The mirror of production is an amazing text in terms of philosophy but very hard to read and understand. Difficult and stylistic as these texts are, then in both there are moments where stunning enlightenment can strike you. He wrote these texts in a transition from being a French Marxist to becoming liberated from such ideas. In many senses they are apolitical and very postmodern.

    In terms of your thinking then I think you would find it useful to combine your Surplus energy theory with Baudrillard’s surplus production thesis. Man has become the object of science for man, particularly in marketing and advertising, only since automobiles became harder to sell than to manufacture. A society that can over produce so easily, needs consumers for its surplus productive capacity. In order to sell the productive surplus it needs to convince, or culturally construct consumers via its advertising and marketing strategies – to persuade them that they really ‘need’ its products. It also needs to establish a means whereby they can ‘afford’ this great surplus of objects which could only be achieved by massive expansion of debt and credit facilities to make surplus production seem convincingly affordable. It also needs to employ other strategies in order to destroy its productions far in advance of their ever being properly and ethically used as such. It starts with built in failure rates and also incorporates fashions to shorten the effective life span of objects. The apple watch will be a good example of this although all tablets and phones now have a short duty cycle before the system suggests that they are too socially embarrassing to continue to use. The surplus energy equation is accompanied by surplus production and consumption equations, all of which are in fact, forms of economic obesity. We can see obese people who over consume food in the real world but other forms of consumer obesity remain hidden in that the unused fat of consumption is hidden in cupboards, attics, lofts and garages as temporary waste storage facilities before their inevitable burial in land fill sites. In all these respects the postmodern system of production is not really productive at all, but can be conceived of as a fantastically elaborate waste production and disposal system.

    There is far too much in these texts to go into here but I really feel that an honest reading of them would give you some valuable new perspectives.

    Regards

    Simon

    • Thank you – I have downloaded this, and started reading it, and your explanation is a good summary in itself. This is indeed thought-provoking!

      Over time, I have become increasingly un- (or maybe anti-) materialistic. Of course, needs do exist – we all need food, shelter, heating (or aircon, depending on where one lives). But there can be no doubt that we manufacture “needs”, creating them out of what are really simply “wants”. In “Three Men In a Boat”, Jerome K Jerome likens a man’s life to a boat journey – travel light (he specifies “something to eat, something to drink, something to smoke and friends to share with”) and the journey will be (in a modern term) low-stress; but a boat heavily loaded, either with un-needed possessions or unnecessary cares, will cause endless anxiety even if it does not (as is likely) overturn because it is overloaded.

      Against this, I recall – back in the days when British licence plates changed every year at the start of August – the manager of a GM (Vauxhall) dealership telling me just how many cars were handed over on August 1st, not at say 9.am, which might almost be reasonable, but starting a few minutes after midnight. Just last year, I heard of people queueing for seven days and nights of a cold English November, just to get the new iPhone as soon as it went on sale. Frankly, I regard this as madness in the extreme.

      This sort of thing undoubtedly reflects sheer idiocy, but propaganda (in the form of advertising) plays a big part too. To watch ads for gambling, you could easily believe that it’s just about winning (when statistically, of course, it is mostly about losing). You could just as easily believe that some of the richest footballers etc drive ordinary hatchbacks (when a Ferrari is more likely!), or that just drinking a certain beer will land you in a glamorous party with all sorts of happy, rich and famous people).

      So yes, I think production – not all of it, but a lot of it – is a headless chicken activity, whose only real purpose is to enrich those who control production (though it also, of course, creates jobs). If the economy is twice as rich as it was x years ago, why aren’t we just working 1/2 the number of hours, instead of the same or more than we used to?

      Of course, national characteristics seem to come into this – I’ve never understood why the British and the Americans seem so much more status-conscious and status-insecure than people in many other countries. But the producers control the agenda…..

      I should add, of course, that production is a process converting concentrated energy to waste, as per the second law of thermodynamics, and its frivolous use is insane unless the supply of concentrated energy is considered infinite, which seems unlikely.

    • Indeed Tim

      I feel that you are a very open and honest thinker and sadly such traits are a rarity these days. I had an american philosophy teacher Jeff Mason (who sadly died in 2012) who said that the hardest thing about teaching philosophy was educating students that there were problems in the first place. The largest problem in philosophy is the notion of ‘common sense’. In economic terms Keynes virtuous productive circle appears to be a common sense view of the world. However, any conception of production/labour/consumption in our current era is subject to a gestalt switch between being a ‘productive’ or ‘wastage’ process. Have you ever seen the optical illusion of two faces – facing one and other which variously look like either two faces or a vase? One can see them as either two faces in conversation or a vase. but one cannot elect or choose to see them consistently in either of the two ways. One looks and there is a gestalt switch between the two possible understandings which is involuntary. I feel the same way about our ‘production/waste’ system, although I lean toward the notion that it is more wasteful than productive

  4. I don’t want to get in the way of yours and Simon’s fascinating discussion but just wanted say:

    Thanks Tim, for your article. I’m not a economist and have little or no background apart from reading blogs such as yours but they have helped me to develop. I’ve realised that just because I’ve now ‘discovered’ the dire situation we all find ourselves in doesn’t mean that the end is nigh. I’ve naively thought that ‘something’ should happen, expectant of a crash of some sorts, immediately. Of course it doesn’t happen like that at all, more of a continuous crumble with the occasional drama. I like to think of us here and elsewhere on the net as dancing around the event horizon on the edge of a black hole, watching things that really shouldn’t happen but are and other things that really should happen but aren’t. Reality truly is stretched at the moment and it’s a fascinating ride.

    I particularly enjoy your style of writing and of its relevance to the UK. Whilst I sit on my smallholding in deepest darkest West Wales enjoying self-sufficiency, resilience and a debt free life, what really scares me is that so few others seem to be aware, just as Simon’s philosopher said!

    Now, back to Simon!

    • Hi Nigel

      I know how you feel, The event horizon is particularly poignant for our current political/economic and social contexts which are all leaning towards various forms of insanity. Which is worse? The fact that governments and central bankers are completely clueless or the fact that US foreign policy seems hell bent on dragging us into a war with Russia? In spite of all of this I think there are still reasons to be optimistic but we have to be patient in a world that has decided that Russell Brand is the 4th most important thinker in the world. I think we all come from various different backgrounds but we all intuitively feel what is wrong with the world and have a sense of the directions we need to move in. it is a difficult, patient and disconcerting process to do the out of the box kind of thinking that is required to address these issues.

      Many thanks for your thoughtful contribution in these difficult times.

      Regards

      Simon

  5. Simon, Nigel

    Thank you both for your thoughtful and helpful comments. When I worked as a broking analyst I always felt that I owed the clients the truth as I saw it – rightly or wrongly, of course, but honestly. Sometimes this can create difficulties, especially in situations of “the emperor’s new clothes”, or where people simply do not want (or cannot handle) the truth, or even a contrary view.

    Production and waste, it seems to me, are indeed different sides of the same coin, or faces in the same vase. Additionally, what can look productive at the time can look wasteful through the lens of history. This can make it useful to try to look at the issues of today as they might appear to the historians of the future. Though difficult, this seems important at a time when one epoch seems to be giving way to another.

    I think, Nigel, that we are “falling off a cliff in slow motion”, but I wouldn’t want to nail my colours to predicting timescales, remembering that it was Keynes (I think) who said that “markets can remain irrational for longer than you can remain solvent”. But the structure of things, to me, is that our system is poised to fall apart, because that is where reckless borrowing, followed by reckless “monetary activism”, seems to point. Logically, the danger is gravest for those countries which have commiitted themselves most deeply to the notion of mortgaging the future to promote consumption today. UK issues are difficult for me, perhaps because I see what many do not see, or do not want to.

    Your situation in West Wales sounds good (especially as I have spent a great deal of time in that lovely part of the world myself). I like the sound of self-sufficiency, and the further you can get from the “silly centre”, the better. A former colleague once told me that “Britain is a banana republic without bananas”, and this seems to get truer by the day – which means that it’s hard to know who or what to trust, whereas at least you know where you are with self-sufficiency. (I am writing this on holiday on a small island that is self-sufficient, at least because it has good soil, plenty of sun, plenty of water, plenty of energy, and more than enough varied production to exchange for things that it cannot produce for itself).

    I’m not surprised by the popularity of Russell Brand, because this reflects an alienation that so many surely feel. I get the feeling that people in Britain are almost holding their collective breath and waiting for something to explode, without quite knowing the what, the where or the when.

    I do not want conflict with Russia, though I do have a lot of sympathy with Ukraine. Britain’s defence and foreign policies seem increasingly ridiculous, but there seems to be little electoral mileage in either. We talk up the “special relationship” with the US, but – over Ukraine – seemed to rule out in advance anything that might impact on City profits. Many politicians seem committed to replacing Trident – even though we couldn’t conceivably use it without inviting annihilation – and we’re building two carriers for which we can neither afford the aircraft nor provide the escorting destroyers and frigates. Still, with much of the media apparently obsessed with whether a man with, or without, “two kitchens” can co-exist with “two fish” (Sturgeon and Salmon[d), it might be a bit much to expect reasoned debate on defence and foreign policy!

  6. Tim,

    Another issue with ZIRP, of course, is that it results in capital seeking riskier and riskier investments in order to try to continue attaining high rates of yield. This ends up making the system much more prone to bubbles and other undesirable instabilities, such as the currently-unfolding minsky moment in the US shale plays. So while we seem to currently need low interest rates to help keep debt burdens managable, this comes with its own set of dangers.

    • True – so governments’ efforts to tackle the last crisis makes the next one likelier. Incidentally, I see that the BoE’s new stress test will examine banks against a scenario which brings UK GDP down by 2.3% – interesting, given that foreign creditors and lenders are already providing 6% of total GDP……

  7. Now that the electoral “gun” has been fired it would be good to hear your views on the economic policies offered although they look as if you won’t be able to slip a credit card between them – on current trends we seem to be headed for a messy, cobbled together coalition which is not very encouraging!

    • David

      Yes, I’ll be looking at this, though as you say there will be little difference between the main parties.

      Robert Peston has noted how both potential chancellors have blocked off most of the tax tools that chancellors usually have at their disposal, committing themselves not to raise basic rate or higher rate income tax, not raise VAT, and so on – he says they have “neutered themselves” by, as it were, pre-abandoning upwards of 60% of potential tax-raising options. In other words, if they were suddenly to need to raise more money, they couldn’t – unless they went back on their election promises, of course……

    • Yes I saw this – neutering as an extreme version of life without trousers. But seriously there seem to be several undeliverable pledges – for example I’ve worked my life in the NHS and cannot see how we will have 7 day working within the proposed timescale. You cannot suddenly conjure up trained senior staff even by throwing money at the problem.

    • Indeed. If and when time permits, I’d like to do a second paper on the NHS. Although I’m no kind of socialist or centralist, I think that “market-friendly” reforms – fragmentation into Trusts, internal markets (??) and targets – have failed, so I would go back to the earlier centralised model, where “a bed-pan dropped in Tonypandy” could be heard in Whitehall. Moreover, when some GP practices are now in private hands, how can it be denied that privatisation is under way?

      As for resources, I’m sure you’re right. But that can be tackled with better use of existing budgets – do GPs really need “practice managers” (on £60k+), do we really need Trust boards, and what have “chief executive officers” go to do with health care delivery?

    • Tim – replying to your April 1st below- is there not a third way with the NHS. We have either massive centralization with all the attached bureaucracy and accompanying silliness such as ministers of health intervening with essentially clinical decisions, or, as you have outlined Trusts, internal markets, privatization and the like. Can we not just have local control of the NHS such as was in the past? I know people will scream about postcode lotteries and the like but the answer to this is for people to get involved and take responsibility for their local NHS. A case for getting people who know about about health running the service (back to Matron!) but at the same time being accountable to their local paymasters.

    • That quotation sounds like Gordon. I’m sure it’s a fair comment – our system is now so corporatist that pledges given to interest groups are one thing, those given to individuals (including voters) are quite another.

  8. David, but hospitals are already open and functioning 7 days a week and 24 hours a day. However, an observation of the staff car park is very revealing. From 8 – 5 on weekdays hardly a space but at the weekends and overnight the true number, the pitifully small number of people involved in direct care is obvious. You are right though, to re-organise .such a poorly run edifice would challenge Hercules himself.

    Money probably isn’t a problem, just print a few more bonds to sell to the BOE and fund it with funny money – a great way to get QE out to the people. It only really becomes a problem if/when overseas suppliers start to realise that it’s only backed by an engaging smile!

    Or, have I missed it entirely….

    • Nigel you are right – huge bureaucracy and people doing weird jobs that don’t seem to have any bearing on what the health service is meant to do – a bloated administrative core surrounded by the thin shell of the coal face (well described by Charles Hugh Smith if you read his blogs). Although there is seven day working, this is limited and complex lab work, radiology, imaging etc generally won’t happen though it depends somewhat on where you are working. So death or complication rates are known to be higher at weekends. However, my point is that you can’t suddenly increase the number of senior trained people to do the lab/imaging work. This takes years however many bonds you print.

  9. I absolutely agree with you. I do feel there is scope for change though. The NHS is too hierarchical, a great many are frozen into inertia whilst knowing full well the ‘what’ and ‘how’.

    I was thinking about a) the psychology of the collective and how fascinating this would be to study and b) whether, having taken away the confounding variables, one doesn’t just ‘relax into death’ in the quieter weekend/night environment. Perhaps a mix of hormones and neurotransmitters might explain more.

    Greater minds than mine I’m afraid, are needed. My wife has just told me I need to change my trousers, apparently they have something nasty from the cow yard on them. Fortunately, I can still afford to do this….!

  10. Dear Tim

    Many thanks – I look forward to your interesting essays and indeed the many comments which they provoke. My knowledge of economics is limited to an A level in 1967! For a very long time I have thought ,in simple terms, that we cannot carry on consuming in the same way as we have been doing since 1945. Unbelievably the disparity in wealth in UK society is increasing at an alarming rate with all politicians more concerned with the haves than the have nots. Where is the concern for those less able to make their way in the world? They are characterised as scroungers or worthless. The lack of provision of housing has so far not been mentioned by any party in this election campaign . These factors, along with a worsening economic climate, will eventually go someway to cause the disintegration of UK society. The UK is an immensely rich country and if there is political will most material problems should be capable of being overcome including the NHS. I am afraid that we are heading for the plug hole (how quickly I know not) and if you do not wish to be swept away then an effort to emulate Nigel needs to be made.

    Kind regards

    Paul

  11. Go on Tim, you can say it! We can’t all live like me! My lifestyle still depends on a functioning economy, there’s no getting away from that. Whilst I have my hydro, solar etc. for a comfortable existence I still require some needs to be met from external sources. Those are lessening over time and without them I could still survive, I wait for society to catch me up, my excess production has almost no value at present. Food is just too cheap.

    This has got me thinking about inflation and not having any formal training in economics allows me the luxury of making a few thought leaps. The recent manipulations of money should have resulted in inflation but, that hasn’t shown to be true at least not in an obvious ‘pound in your pocket’ way. Vast sums have been thrown at the NHS and that has led to the inflated incomes of some and crazy prices for suppliers. So it is there. Vast sums get thrown at benefits, and house prices have inflated, rents have inflated, unnecessary phone nonsense has inflated and so on. Food should’ve but it hasn’t what’s inflated there have been waistlines :o).

    I suppose market forces still apply to food, maybe what is happening is that farming is so efficient and production so high that the market just can’t manage to sop up all the excess.

    It is all just too complex and that’s why I’m so grateful to Tim and others for their guidance…

  12. Paul, Nigel

    Thank you for this – much to consider! Please forgive this tardy and brief reply, but I’ve been working on my next article, which I think addresses many (perhaps most) of the points that you both raise.

    Basically, the political parties are offering policy twiddles that don’t really address the fundamental issues.

    For instance, manufacturing output has dropped by almost 30% since 1997, and output priced at global market levels has decreased by a quarter. Our economy has grown by roughly £500bn (in real terms) since then, but debts (excluding the banking sector’s horrendous mess) have increased by close to £2.2 trillion.

    Worst of all, we seem to have decided to become a low-wage economy – multinationals may like this, but we cannot sustain domestic consumption this way, or for that matter afford good public services on the tax take yielded by a low-wage economy.

    We have sold off so many businesses, and taken on so much foreign debt, that our former income from net overseas investments has reversed into a decisive outflow. Add the trade deficit to this, and money is flowing out at the rate of £100bn annually. In short, we need to change………….soon…..

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