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THE DEATH OF ECONOMICS: Aircraft design vs flat-lining financial models

Fags and booze to the rescue

My dear, never confuse efficiency with a liver complaint

Entrance to Bethnal Green Underground station A homeless person sits at the top of the steps, too dispirited even to beg

A homeless person sits at the top of the steps, too dispirited even to beg.
Photo by Dr Neil Clifton, licensed under CC BY-SA 2.0

These restrictions to tax revenue have not been effectively acted upon, so the result is an over spend, the annual amount of which is known as the budget deficit. How is this deficit funded? Well, you’ve guessed, by borrowing. The government does not even seem to be able to bring the budget deficit under control, let alone to reduce the National Debt, which presently stands at about £1.3tn, or around three quarters of GDP.

After bumbling along at 40-50 per cent of GDP, it started to climb steeply following the last crash. It presently corresponds to about £40,000 for every Brit who has a job. The astute reader will have noticed the precise parallel between the ever increasing National Debt and the ever increasing amount owed in the negative amortisation mortgage. Finger in mouth time.

Once the desperation for growth to pay for reckless borrowing is accepted, most government action, or lack thereof, can be understood. Pensioners are very much on their own. They have no voice; it’s not as if they can go on strike. The need to cut carbon emissions cannot and will not result in much government action because fossil fuels are heavily taxed and they need the money. Cutting carbon reduces spending on fossil fuels and reduces the taxation.

But all I need is cigarettes and alcohol

It should now be clear that the creeping approach to dealing with smoking and drinking is because less spending on fags and booze reduces growth. It should also be clear why politicians deregulated banks so they could get more people into more debt, in order to finance a consumer spending boom that would lead to growth that would keep the crazy scheme going for a bit longer. In fact, it led in the end to repossessions, negative equity, millstones around the necks of consumers and governments alike and an underclass of people with no hope. Economics, as it is practiced, isn’t a discipline: it’s an indiscipline.

The long standing need for tax revenue raised on energy has led to the UK’s housing stock being appallingly insulated and inefficient, so now we face a winter of energy poverty where we will be selling the silver and chopping up the furniture to put on the stove, or dying of hypothermia. If the weather was better we would be growing bananas.

The reason for sustained flat line near-zero interest rates becomes clear. This is why Mark Carney invents a new and unmet criterion for raising interest rates every week. The European Central Bank just cut rates to 0.1 per cent. There is so much debt that any increase in interest rates will result in a collapse in which consumers, businesses and government alike find it impossible to pay the interest.

If consumers by some miracle come by some money, they are not going to rush out and buy goods with it; they are going to pay off some of their debts. People are ceasing to be consumers. In a future piece I intend to take a good look at consumerism and how not to take part.

Although GDP is now back to pre-crash level, the population has gone up so per capita GDP has fallen, as has average income. Unemployment has not fallen because our industry is picking itself up but because thousands of people who were laid off in the aftermath of the crash have started working for themselves. Perhaps crucially, tax revenues are down while the cost of interest on the National Debt is up. Some recovery.

Looked at another way, GDP is also an indicator of the amount of the world’s resources that were used up by commerce. In other words it is the rate at which the planet is being raped. So it is immediately possible to see that politicians are in a bind, because they are financially unable to stop raping the planet, which is why environmental summits are a joke.

We need to look very carefully at how and why economics has got us where we are, to ensure that the changes we need to make reduce the recklessness and improve stability. One issue that is glaring is that the average person has no idea about economics on any scale from domestic to national. This is due to its being completely ignored in our educational system, which is scandalous, and, I suspect, deliberate.

It’s high time that the principles of economics were incorporated in the school curriculum. It won’t help the immediate crisis, but it would be nice to think that a future generation would be better equipped to understand risk and not get in over its head, and possibly to convey that more or less bluntly to our so-called leaders. ®

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