Blogging from the Highlands of Scotland until I return to the Murcia region of Spain in the Autumn for a month or so
'From fanaticism to barbarism is only one step' - Diderot

Wednesday, 16 July 2008

The financial 'crisis' - to blog or not to blog

Like some others (many others) I have been, in my case for at least a few years, observing with some apprehension likely developments in the global economy. In the UK these developments have become more obvious to 'the man in the street' for roughly the last year when domestic financial bad news began to hit the headlines. Whilst I have blogged about this from time to time over the past four or five years, I have not felt it wise, or useful, to keep up a running commentary on every new 'disaster' - it has seemed clear to me for some time that a global economic re-adjustment, long predicted, is now finally underway - it is not going to happen overnight and in my view we are only near the beginning of what is going to happen over the next few years, but it is not going to be pretty or commfortable for many of us, specially in western countries which have been relying for many years (decades) on increasing levels of borrowing to sustain our national and individual economies. One day the bill has to be paid and that day is upon us, except it won't be over in one day. There will always be survivors, though. How individuals manage their own resources can make a big difference to how badly they will be affected, but it is probably true to say that for those (the vast majority) who have done little or nothing so far to rein in their indebtedness, by continuing their profligate practices of acquiring more and more goods and services (cars, houses, clothes, expensive vacations, etc.) by increasing their borrowing to fund them, are going to be facing difficult times. The same goes for national economies of course. Our own government has breezed ahead with its redistributional policies, by squandering our national resources and by increasing borrowing levels dramatically. Only the US government has been more reckless.

However, one day the holders of debt paper begin to realise that the real value of their assets may be a good deal less than the face value. The situation is even more toxic when the economies of the main lenders (whether individual, corporate or national) have been able to grow hugely rapidly solely as a result of the consuming nations historic high credit ratings being assumed to be 'good' for the debt. In other words the whole global economy has been based on 'confidence' and it is that confidence which is in process of undergoing a massive re-evaluation. Naturally in this situation the hunt is on for people to 'blame', but the only people to blame are ourselves - rather too many have been willing to give their votes to political parties who have promised nirvana in the short-term and the politicians who have peddled this story are, through a mixture of ambition, incompetence and venality, going to be the obvious targets. The truth is, though, that a large part of our historically-high standards of living in western countries is built up on unsustainable bases. It all comes down to the old saw: total income one pound, coupled with total expenditure 99p, happiness, but let total expenditure creep up to 101p whilst still having income of only one pound and you will have misery. A lot of people are going to have to adjust their expectations - that food must not be squandered, that clothes should be expected to be used until they are worn out and not changed simply to stay in fashion, that vacations will probably have to be briefer and less epxensive, etc. Those are only the cosmetic changes though - what really needs to happen is that the State is reduced to a much smaller role and the safety-net which it provides, with our taxes and our national borrowing, will have to be similarly reduced. And of course people in countries which are already poor and with economies which don't amount to much (large parts of Africa, parts of Asia and Latin America) are going to see their sometimes already pitifully low standards of living fall, with the so-called 'rich' nations no longer in a position to, or willing to, help out in any substantial way.

Now, I think I have rambled on for quite long enough. I read with interest this blog post some days ago, followed up by this one today - I'm afraid that what is speculated on there is not at all far-fetched. However, being of an optimistic nature, I would say that ultimately a lot of the changes which are in process will be good for all of us, but it is undeniable that along the way many are going to suffer. Our individual and national task is to ensure that we are on the right side of history by taking appropriate action - it is too late for many, probably, but who said anything about life being fair? I have been preaching this in a low-key way here and elsewhere for years, as have some others; it is not my problem if some are only now waking up to the mess they've got themselves into. I hope the government, in its [hopefully short] time remaining in power does not try and 'help' by raising taxes to sustain its profligate levels of public spending in the hope of bolstering its chances at the next election; if the British people fall for that one again, then they really deserve all they get!

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