Recovery?

September 2011 If you read the UK government’s forecasts for our ‘recovery’ you will see just how mendacious our leaders are being. Their predictions of our growth in GDP are based upon a renewed increase in personal borrowing. Borrowers such as you or I have collectively reduced our loans from 180% of total GDP to 160% of GDP over the past two years. However, the government is banking on us increasing that borrowing back up to 180% in order to drive our consumer economy once again and deliver the growth in GDP their require to pay down the levels of borrowing they are committed to. Let’s get this clear. The UK government are encouraging us, by keeping interest rates negative, to give up prudent saving and borrow our way back into further debt- in order to maintain and fund their policies. It’s like an addict being deliberately led back onto the streets and given a needle with raw heroin inside by the very ones charged with our recovery. Now one more figure to get this in perspective. Imagine a pile of £50 notes. If you had £1,000,000 that pile would reach about ten inches high. So, for example, a pile the height of the Canary Wharf tower so frequently on our screens right now, would be worth about 1 billion pounds. The government THIS YEAR ALONE is BORROWING ONE HUNDRED AND FIFTY TOWERS OF DEBT to fund our public spending. If we think austerity has even started we are seriously mistaken. If we think we will be able to pay off this debt, we are seriously mistaken. Preserving debt- inflated asset prices, such as property, whilst at the same time paying down massive government deficits is a contradiction in terms. One or other, or almost certainly both with varying degrees of pain and chaos, will unfold in the coming years. I suspect it will not be a short, sharp shock but a re-entry into grinding stagnation and, depending on the severity of deflation in the global and European economy, a growing risk of depression. This is much more akin to 1930 than 1970. (c) Simon P Walker 2011