So Mr Cameron thinks that we are coming out of recession and that a recovery is taking place. There has been a lot in the media recently suggesting that the recession is coming to an end but I haven’t seen any signs of a recovery in Sheffield. Could it be that the government are trying to create the illusion of a recovery just in time for the next election?
We have been in this financial crisis for the past five years and things don’t seem to be getting any better despite the government rhetoric. The rich are getting richer certainly, there has been a recovery for the rich, but what about the rest of us? Those of us in public sector jobs took a pay cut some years ago when the government raided the public sector pension fund and we haven’t had any pay increases since then. So pay is frozen and prices continue to rise ... seems like a pretty bogus recovery to me.
If people elect a Conservative government then they get exactly what is says on the tin, government of the rich, by the rich for the rich (to misquote Abe Lincoln). They get a government of posh boys looking after the vested interests of big business.
Unemployment is down, well sort of, most of the new jobs created are part time, short term contracts and zero hours contracts. The minimum wage which was meant to be a safety net for low paid workers has become the ‘going rate’ for many employers. These things are good for big business but not good for ordinary people.
The recovery, such as it is, has been brought about by very low interest rates.
Low interest rates tend to fuel borrowing, and unsurprisingly borrowing has risen. Levels of household debt are now at a record high, even greater than before the crash. It seems incredible to me that people use debt to try to spend more than they earn. Over the long term you cannot spend more than you earn and this attitude of buy now, pay later is what got us into the financial mess in the first place. Of course the banks love people to spend more than they earn, just think of all those interest payments and overdraft fees.
This is also seen in the UK housing market, which has been fueled by the new ‘Help to Buy’ programme.
House prices have risen rapidly and nearly recovered. Across the country, average prices are about £30,000 lower than the peak £200,000 reached in August 2007, according to the Halifax, Britain’s largest mortgage lender.
A recovery which is fueled only by debt fueled spending, growth in the financial sector and a housing bubble is not sustainable.
Debt fueled spending in the housing market is critically dependent on interest rates and they will eventually rise which will mean that the people who could not afford to take on those debts without the low interest rates will not be able to maintain the payments. The housing bubble will burst.
It isn’t just personal debt which is a problem, the country has been living beyond its means since the late 1980’s or early 1990’s.
Whatever politicians may tell us about the need to curb the deficit, debts on the scale that have been run up by successive governments cannot possibly be repaid. The most likely solution will be to rely on inflation to diminish their value, but this also diminishes the value everyone’s money which will be impoverishing for the vast majority of people.
It is notable that the global financial crisis was created by investment bankers and financiers gambling with money (money that didn’t actually belong to them or that didn’t even exist) rather than by companies that actually create physical products. These companies were all hurt by the crisis, but didn’t play a role in it’s creation.
In Britain the way in which successive governments have sided with the City of London against British manufacturing since the 1950s has had very serious implications for the economy of this country. We’ve actually screwed industry and manufacturing in order to keep the financiers happy.
Any sensible person right now would join an anti-capitalist organisation.
For example, consider the bonuses of bankers and hedge fund managers, you would have thought the global financial crisis would have stopped all that. Actually the wealth of the rich in Britain has accelerated just last year, and the bankers and hedge fund managers are still getting obscene bonuses.
And with a Conservative prime minister who has never suffered a day’s financial hardship in his entire life telling us that “we’re all in this together” I don’t see any signs of change happening any time soon.
The government is cutting the welfare and benefit budgets. The burden of Britain’s deficit is being be placed on the very poorest members of society.
It’s very tempting to see the financial crisis and various things which led up to it as a classic Greek tragedy of hubris begets nemesis.
Like Icarus you try to fly, you fly too close to the sun and the wax holding your wings together melts and you fall down to the ground. My personal view is that it’s not just tempting to do that but there is actually a lot of truth in that way of thinking. I think the bankers hubris did indeed beget nemesis.
But the big problem is that it wasn’t the bankers upon whom the nemesis descended, it was the rest of us.