Are People Nuts?

[woodpecker]

Average per capita debt (unsecured CC etc.), compared to incomes, gives an idea of just how manageable that spending is.

The secured debt comes on top of that. There are still so many with mortgages they could never really afford, even at the top of the market.

Many are spending as much as they earn, or more, to fund the normal stuff. Amazing how many put things like supermarket shopping on the credit card.

And CC companies are still charging 17-20% pa interest. Way, way more than base rate. So servicing that debt is expensive.

Yes, there are still people around with money (around here, mainly bankers or the wealthy recently retired) but a lot of quite normal people are having problems meeting what they used to regard as normal expenditure. The shops in this quite affluent area are definitely all doing less business, and some entire streets are struggling. Many of the self employed are making a whole lot (30-60%) less (but costs haven't gone down). And there's still a sizable public sector impact to come here (borough with high public sector employment).

[Ludwig]

Yes but Biff, the thing about being in government is that you have to think of the future, not just whether it's BAU at present.

The fact that people have disposable income now doesn't mean that they can provide anywhere near enough in tax revenues to bring the national debt down significantly.

To argue that no cuts were necessary is just obtuse: how would you bring down the national debt?

I think that my point is that all this shopping shows there is still slack in the system. The government, if it wishes to increase its revenue, could tax people more (the shopping shows they have spare disposable income). The government chooses not to tax more (because that's the nature of right wing Tories) and so cuts public expenditure hiding behind the fig-leaf of national debt.

I'm not saying that national debt is not something that has to be taken into account, just that the government doesn't have to hide behind it while covertly lurching us to the right.

So you think tax alone can rid us of the national debt, in the face of significantly reduced government tax revenue due to the recession?

My own view is that the cuts announced so far are nothing compared to what's coming. I foresee the near-total collapse of the welfare state within the next few years - not due to the Tory cuts, but in spite of them. Once we can't afford to import oil any more and/or the pound goes totally down the tubes, the whole economy will evaporate overnight: no jobs, no tax income, no services.

I honestly believe that the Tories are trying to avoid this situation - they may not be trying to do it fairly and equitably, but they're trying to do it.

What I'm saying is that the damage is done, and to complain about Tory policies now is rather like complaining about prison food the day before your execution.

[biffvernon]

Yes, Woodpecker, but again this is looking at just one half of the situation. For every debt there is an equal and opposite loan. PowerSwitch ought to be the place where the economy should be studied not in terms of money flows, loans and debts, expansion or contraction of the money supply, but in the much more real terms of energy flows.

We are pretty much agreed that we are on the bumpy plateau of peak oil, so, inasmuch as oil underpins the economy, we should be at about peak wealth. This is evidenced by all the shopping. What should concern us is not the artificial froth of money but the underlying energy flows. What should worry us is not debt but the prospect that the energy flows will slow. Moreover, the rate of slowing will not be even; the BRICs continue to steam ahead for a while, the old industrial countries limp along on their legacy and sub-Saharan Africa does without.

[biffvernon]

So you think tax alone can rid us of the national debt, in the face of significantly reduced government tax revenue due to the recession?

No, I'm not saying that. Neither do I think that getting rid of the national debt should be the top priority - it hasn't been since at least the Napoleonic wars.

You're right to be doomerish aboput the future but whether or not the welfare state collapses is a political decision. We can make a transition to a low energy future while improving equality and care for the under-privileged. What is clear, however, is that this is not on the Tory radar. They just want to shrink the state and are happy that events have provided the opportunity.

[ziggy12345]

....PowerSwitch ought to be the place where the economy should be studied not in terms of money flows, loans and debts, expansion or contraction of the money supply, but in the much more real terms of energy flows.....

+1.... Perfectly put

[Lord Beria3]

Biff - energy and money are two sides of the same coin.

Once a country can't afford to pay the interest on its national debt, it won't be able to import those energy flows going around the global economy and will collapse.

You can't artifically seperate the two. A country with ZERO debt has a better chance of capturing the shrinking energy flows in the future as they have no debts to pay of and can build a strategic reserve of cash and assets to buy real stuff which is vital.

You also forget that as energy prices go up, the amount a country needs to import in terms of oil gas and food goes UP, whilst the amount of money left after rising interest bills is going DOWN.

This is why the debt does matter and how is is perfectly tied to energy flows.

[Lord Beria3]

Biff - regarding taxes, I disagree with your premise that taxes are low - Tax Freedom day for the UK is now in May!

http://www.telegraph.co.uk/finance/pers ... g-tax.html

Of course, you will counter that the rich and corporations have lots of money offshore... true but you would only be able to claim that money if the world agreed to international regulation and that is not going to happen.

[kenneal - lagger]

The government, if it wishes to increase its revenue, could tax people more (the shopping shows they have spare disposable income). The government chooses not to tax more (because that's the nature of right wing Tories) and so cuts public expenditure hiding behind the fig-leaf of national debt.

Why don't they just tax us all at 100%, ration out the food and fuel and we could have 100% employment in silly nonjobs dished out by government and no spending on imported rubbish. Biff Heaven!!

[biffvernon]

Nope, LB3, I don't agree.

Money is utterly artificial. Once upon a long time ago it was related to certain metals, particularly gold, silver, copper, tin, and iron, which could be dug up by anyone lucky enough to be in possession of the right bit of land. Or cowrie shells. But that was long ago.

Energy is very far from artificial and that derived from fossil fuels is in the possession of those lucky enough to have the right bit of land.

When we have rid ourselves of our fossil dependency and moved to using only that which is generated renewably, then much of the basis for our economy will have been transformed.

But money and energy will still be fundamentally different things.

[biffvernon]

The government, if it wishes to increase its revenue, could tax people more (the shopping shows they have spare disposable income). The government chooses not to tax more (because that's the nature of right wing Tories) and so cuts public expenditure hiding behind the fig-leaf of national debt.

Why don't they just tax us all at 100%, ration out the food and fuel and we could have 100% employment in silly nonjobs dished out by government and no spending on imported rubbish. Biff Heaven!!

As you know, such methods have been tried but have been shown not to work very well on a nation-wide scale. There are several unintended consequences. It may be an appropriate model for certain intentional communities such as monasteries and nunneries.

[Lord Beria3]

Biff, your not a goldbug are you?! Gold is the only real money!

Money is a reflection of energy (in its broadest term).

I was playing Monopoly last night with my friends, two of my mates went bankrupt over-spending on properties and not having any cash left over... I kept a certain amount of money in reserve (for emergencies) and managed to last to the final two.

A game yes, but lessons for countries. Don't get into too much debt, always have cash reserves available for emergencies and try to build up real assets in the long-term.

Having a massive debt is the total opposite to any sensible approach to managing money.

[madibe]

Monopoly:

Capitalist strategy: Buy Mayfair and Parklane - get hotels as soon as possible. Outcome - you win. That means everyone else loses, but its a game and that's the point.

Socialist Strategy: All fines raised by the state go into a pot and when someone lands on 'free parking' they get the pot. Outcome - the game lasts a lot longer, the bank is in danger of running out of money. It is a lot more fun. Ultimately however, the capitalist pig that bought Mayfair and Park lane wins - but not only do they win the game, they also own all the money that was in the bank.

Coalition Strategy: Charge any player that needs to read the rules £9000.

Liberal Strategy: Tell everyone that you want to help develop Old Kent Road and you will forgo any fees for landing on it - do that but then buy Mayfair and Park Lane too.

[biffvernon]

Very good, M.

Just off to play Settlers of Catan. It's control of primary resources that counts.

[DominicJ]

Not sure if its the VAT increase, I went to a Next sale a few years back, got three big bags of decent clothes for about £200-£250.
Quite literaly bought everything in my size.

[lancasterlad]

DominicJ
Joined: 18 Nov 2008
Posts: 2000
Location: Manchester UK

HAPPY 2000th POST!