See the excellent article in yesterday's Telegraph by David Blanchflower “Green Shoots – strictly for the colour-blind” . He finishes the article by saying : “…….we have yet to realize just how painful the coming years are likely to be”
There really is an extraordinary global “spin” campaign in progress at the moment , puffing up the slightest positive statistic .
The reality is as set out by Mr Blanchflower, until recently one of the BoE’s Monetary Policy Committee.
What makes this slump unique in the West since the Great Depression is the damage which has been done to the credit system. A malfunctioning credit system, which is what we now have , stunts the growth we have become too accustomed to and take for granted.
The way the authorities have responded to the depression is similar to the way Japan responded to their similar problem in 1990-1 – “rescuing” the financial system with a corresponding hike in Government debt. The consequences are still with Japan to this day : a growth-free domestic economy for the last 18 years; only exports have kept Japan in positive growth territory. Recently even exports have collapsed.
The immediate cause of the depression – the “trigger” – was indeed the collapse of the US sub-prime mortgage asset bubble, and similar bubbles in Spain , Ireland and elsewhere. But this collapse merely brought to a head an underlying malaise in the global credit system which has been growing for two or three decades past, possibly longer.
The cause of the malaise has been persistent Government deficit-financing and a cost of credit manipulated by the Authorities to too cheap a level, leading in turn to a collapse of the savings culture. This malaise will not be put right overnight . Indeed the political consequences of rectifying the credit system make remedial action by today’s self-serving political class inconceivable .
But the cost of NOT rectifying the malaise will be even worse. The two major Asian economies – India and China – will fare much better than the West due to their low-tax and low public-spend economies . Everywhere else will fall into high and growing unemployment, with falling living standards due primarily to persistent indebtedness, both State and personal.
Change is necessary for survival.If the West is to escape future economic subjugation , new politicians with new ideas will have to take over, somehow.
Marxism and Fascism are both totally discredited “solutions” . What is really required for a better future is a Government utterly committed to reversing the big-State profligacy of the post-war years and to the free operation of unrestrained capitalism which alone can generate the wealth needed to improve living standards and maintain economic and political independence. There seems little sign of any such Government appearing anywhere in the West at present. On the contrary, the Big State appears to be getting worse, not better, at the moment .
However , suffering can often make things change quickly.
Between where we are now and a New Dawn lies a lot of political and social unrest in the coming decades.
P.
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