Blog 2023 Malcolm Blair-Robinson

This news was bound to come and before we are out of the wood it will happen again. It plays well for Ed Balls in his new shadow economic role and will make for lively PMQs today. It also reveals an alarming lack of grasp among very senior people about the realities and fundamentals of the mess we are in.

Our economy was based on an utterly shattered model. It was inflamed with hyper wealth secured on hyper inflated assets stoked by the continuous creation of new money by a corrupt system. Because the securities, futures, bets and parcels of dodgy loans have no actual value whatever outside the game in which they play, the money they generate is a measure of nil or near nil. Those new to this explanation might want to refer to my book or to previous posts on this blog about money as a measure. Because the boundless trillions cascading electronically round the financial capitals of the world are a measure of nil, when the music stops, known as a credit crunch, all the institutions find they have run out of real money and are technically bust.

The reason for this is that the real money or its root, real wealth, never grew in the first place, but the debt obligations undertaken in the belief that it had, are not only real and expressed in real money, but have also to be repaid. Moreover the U.K had the biggest deficit expressed as the shortfall of government income to government expenditure of any of its competitors. This, in turn, means that the accumulated amount borrowed to bridge the gap is huge and growing. Growing every single day.

When the car crashes, it is no good to patch it here and there and send it on its way because it will break down and the journey, once again, will be interrupted. It has to undergo full and complete repair, after which it will motor on trouble free. It will motor under its own power without assistance, whereas the broken car, to move, has to be towed.

Therefore talk of two things is misleading and confused. Growth stimulation is one. This not necessary if the conditions for growth are established. It will be spontaneous and self sustaining. Reducing debt at government, corporate and personal levels is a must and nothing will help more than the reduction of the budget deficit.

Second is the talk of reducing the pace of deficit reduction. This cannot be done without increasing the level of government borrowing. To advocate that is madness. Already future generations have a millstone of debt to discharge for our folly. Collectively we owe the second highest total in the world  at four times the world average expressed as a percentage of GDP.

The Chancellor must hold his nerve. He has the support of the OECD. He has set out a good and bold plan. He has the confidence of the markets. He must follow up with a business and employment friendly budget. The enterprising British people, who shine in adversity, will buckle down and do the rest. That is how it is supposed to be. There is much learning to be done, not least by the City. It needs to rediscover that it is a cog in a much bigger wheel. It is not the wheel.

This entry was posted on Wednesday, January 26th, 2011 at 12:51 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.