How to ruin a nation

By Bengt Saelensminde Sep 28, 2012

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  1. Critic Al Rick

  (28 September 2012, 05:48PM)  Complain about this comment

  Crikey; I'm not alone, there are others who see the relevance of Trade Surpluses (Balance of Payment Surpluses) and Budget Surpluses.
  
  Profit is Sanity, Turnover is Vanity.
  
  Trouble is - it's much too late to avoid the inevitability of real austerity. They cannot inflate without increasing Trade Deficits and Budget Deficits in real (or nominal) terms. We're stuffed.
  
  

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  2. Jim C

  (28 September 2012, 06:06PM)  Complain about this comment

  Hey Bengt, I'm afraid you're not entirely correct on the deficits front. You can run a trade deficit for as long as your vendors want your currency... in fact, you can't issue the world's reserve currency *without* running a trade deficit (this is now known as 'Triffin's dilemma' after the economist who first observed it back in the '60s).
  
  The US finds itself in this position because i) Bretton Woods, and after that collapsed, the US-OPEC petrodollar agreements of the '70s.
  
  And even if you don't issue the reserve currency, you can run trade deficits because (unlike under the gold standard) we now have an endogenous money supply - when we buy foreign goods, the pounds we use don't disappear - they are now held by foreigners who can only spend them where pounds are accepted, ie, the UK.

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  3. Jim C

  (28 September 2012, 06:07PM)  Complain about this comment

  Obviously, trade deficits ordinarily push down the value of one's currency, thus acting as -ve feedbak on the process, but as central banks around the world are all constantly manipulating their currencies downwards... don't bet on it :-)

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  4. La La Land

  (30 September 2012, 11:35AM)  Complain about this comment

  For years the the Ruling classes, Banks and Government has sold our Brands or transferred our manufacturing industry abroad gleefully - there is very little that you can buy that is made in the U.K.
  
  On top of that we have handed money out around the World in investments - rather than investing money in manufacturing in the U.K. Neither have we insisted on a level playing field in that goods for sale in the U.K. are produced under similar health and safety regulations.
  
  Inequality and lower standards of behaviour (i.e. greed) is destroying and devaluing our British brand, dividing society (divide and rule principal?) and the wish to work together harder for the greater good.
  
  Finally with unemployment, homelessness and the National Health bill so high, stop immigration now - we do not need more people in our crowded island.We just need a more equal society and then maybe we might see our trade imbalance come down.
  
  
  

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  5. Sergiy

  (01 October 2012, 09:24AM)  Complain about this comment

  A brilliant article!

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  6. Stephen Griffiths

  (01 October 2012, 11:20AM)  Complain about this comment

  It is astonishing that we accept as normal, behaviour that we could in no way get away with ourselves. Don't spend what you don't earn. Most of us have to abide by that in our personal finances. Not only that the government is telling us all we should be storing extra in savings for the future.
  
  I'm trying to imagine the scenario in which I could say to the bank, my income is falling at the moment so I need to spend 5-6% more than I earn every year because at some point in the future I hope to be better off and in a position to pay it back. You'd be laughed at. It appears to me that most of the so-called science of economics is based on finding ways (like currency printing) trying to avoid this one very simple rule, for the benefit of preserving the illusion of democracy.

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  7. Colin Selig-Smith

  (01 October 2012, 11:47AM)  Complain about this comment

  Good points.
  Ironically, gold would prevent both deficits getting as out of balance as the US/China trade balance.
  It would also act as a natural trade barrier against the outsourcing of jobs as well. If you can't import everything then you have to make it yourself at home.
  The world would be a greener place, if you have already exported all your gold, it makes it difficult to buy more oil. Countries would find themselves placing far more emphasis on alternatives.
  
  It's amazing just how damaging politicians and economists are when they manipulate money.

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  8. Robin

  (01 October 2012, 12:48PM)  Complain about this comment

  Someone famous said that inflation was a massive theft from the masses. I think its more accurate to say it is a theft from the middle classes. The lower classes don't have any assets, and if their labour is still valuable, increases the one thing they do have.. their labour.
  
  I think we are headed for inflationary times, as its the only real way to reset the economy. And its happened before. As for trade deficits, etc, everyone else will need to inflate as well.
  
  Some countries won't, mostly progressive emerging economies, such as india and china, but without a market to sell to, they will have to embrace consumerism. That means less inequality and less profits for industrialists in their countries, but ultimately better for the human condition.
  

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  9. robin

  (01 October 2012, 12:49PM)  Complain about this comment

  Stronger currencies in these countries, means less ability to outsource/purchase by countries like the US and UK. Business should move back to the UK.
  
  Don't forget that our society is based on things that are not so readily measurable or transferable in monetary terms. Rule of law, an educated populace, both in terms of level and ethics, and investment such as housing, water, electricity etc.
  
  This argument doesn't defend 'investments' of today though. But the world isn't going to end.

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  10. Paul T

  (01 October 2012, 01:07PM)  Complain about this comment

  The Labour party are baying for increased spending to create jobs and therefore stimulate the economy. What they mean, but don't say, is create jobs by increasing the size of the overblown public sector (the real reason for our malaise) Yes, easy to do and it would indeed create jobs, and temporarily stimulate the economy, but it's the reverse of what's really required and would be digging our hole even deeper.
  Is it just me who finds the sight of Ed Balls make me cringe?

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  11. Tim C

  (01 October 2012, 02:24PM)  Complain about this comment

  
  Progressive taxation, regional policy and payments to the EU all involve compulsory transfers of money from the people who made it to a third party. This easy money is wasted in a way that the people who earned it would never have done. The spender looses track of value and their whole budgeting is corrupted.
  
  It is easy to see this in Greece or Valencia, but their are sublime examples from home: £1m houses for "asylum seekers"; the scottish parliament; or £40m bonuses for MOD staff when £2m can't be found to keep our last aircraft carrier in reserve.
  
  La La Land's analysis that lack of equality is the cause of our problems is flawed. Imposed equality is failing for the same reasons that Soviet collective farms failed. Governments need to learn to trust people largely to dispose of their own incomes as they see fit. With top rate income tax/NI at 59%, plus council tax etc, the wealthy will seek to find ways out of handing over largesse just to be wasted.

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  12. Critic Al Rick

  (01 October 2012, 04:29PM)  Complain about this comment

  @ 12. Tim C
  
  I would agree with La La Land if he is saying:
  
  a) that growing inequality is the cause of our growing economic (and other) problems
  
  b) that the way the problems are being dealt with (i.e. via greed) is increasing (in the short term at least) the inequality, thereby exacerbating the problems.
  
  In short, we have a vicious downward spiral of greed induced inequality chasing a deteriorating economy - in the absence of a suitable change in a factor affecting that system we have a self-perpetuating economic death spiral.
  
  To return such an economic system to healthy equilibrium requires the reversal of the greed induced inequality. Otherwise we'll tend towards an unhealthy equilibrium where the Middle Classes have been exterminated, the masses are thoroughly demoralised and disincentivised, and the greedy rulers become targets for assassination.
  
  
  
  

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  13. mic

  (01 October 2012, 04:37PM)  Complain about this comment

  Paul t
  re ed balls
  i saw a poll on the net today which asked
  Are u more likely to vote labour with Ed balls or less likely
  Result;
  30% more likely
  605 less likely
  i suppose the other 10% were labours don't knows!

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  14. Tim C

  (01 October 2012, 05:26PM)  Complain about this comment

  Dear Critic Al Rick. It's wonderful that you find the views of La La Land so attractive.
  
  Greed, the urge to have more is ethically neutral and in the real world it can be useful. It can cause for instance businesses to be born leading to growth, employment and creativity. It does perhaps lead to a narrow focus on the desired object that can be an issue. However, the greedy are also often greedy of other things such as life and culture and often have a generosity of spirit and often love to share and give. People who like giving still don’t like having things taken from them. It is wrong to think of the greedy as being mean by definition.
  
  Envy of course is always mean, horrid and destructive. With Envy-driven politics it isn't enough for Peter to be robbed to pay Paul, it calls for peter's house to be burnt down too. I'm not just taking about taxation here, that's the attitude of the EU too. The original article was "how to ruin a nation" not "let's ruin a nation".
  

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  15. BOB

  (01 October 2012, 05:58PM)  Complain about this comment

  Bengt talks of a potential military take over in some European.
  There are 2 fundamental flaws with democracies and these realities have to be sorted out if democracies are to survive and not lapse into totalitarian states of one kind or another.
  1. Politicians are only elected for a term and have to keep there eye on the next election which means no politician will make a big unpopular decision to deal with a medium to long term problem. For example sorting out the nation's pension deficit problem or deciding on a new airport for London.
  2. Politician's promise things and to do this they spend beyond their means and pass on the problem of to the next generation to pay the account. For example public private partnership building hospitals. Consequetly a deficit builds up which eventually will collapse the system.

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  16. Critic Al Rick

  (01 October 2012, 06:41PM)  Complain about this comment

  @ 14. Tim C
  
  Thanks for your response.
  
  I didn't say I found the views of La La Land attractive, I said I conditionally agreed with them.
  
  You're right; this article is about 'how to ruin a nation' and it specifies two prime contributory factors:
  
  1) Trade Deficits
  
  2) Budget Deficits
  
  And there is absolutely no way these factors will be suitably reversed without the co-operation of the 'generosity' of the (too greedy by far) PTB. Their greed is unsatiable, it's an obsession.
  
  And no, I am not jealous, not even envious. But I, for one, am furious to see my little bit of extremely hard earned wealth being eroded by the day.

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