The issue is that the current coalition has doubled down on policies that have a failed record. They've cut the fuck out of social welfare, education funding, unemployment, and housing benefits while raising a regressive tax that overwhelmingly affects the spending capital of middle and lower class people while having little noticeable effect on the spending habits of the wealthy. That has helped to severely curtail economic growth because people buy both services AND goods, some of which are imported, but many of which are based right here in the good old UK. Sure, I bought a Samsung Blu Ray player with my tax refund, but I bought it from a local guy who made a profit and used it to buy a car made out somewhere near Milton Keynes or something. The idea drops in consumer spending aren't a significant drag on growth because we import shit has been pretty roundly disproved.
Instead, the government has spent a lot of money on a shit-load of QE, which has its uses and has worked to stymie the economic decline, but also has its limitations. For one thing, it's done wonders for the equities markets, which are miraculously back to where they were in 2007, and has utterly failed to trickle down in to substantially increased investment in hiring or infrastructure, despite that being kind of the idea behind keeping asset prices high. What it's done is inject an enormous amount of liquidity in to financial markets, boosted asset prices and made the rich VERY rich, but is essentially the same trickle-down bull-shit that exacerbated income inequality in the 80s. If QE went away tomorrow, the price of oil would drop sharply, and for good reason - global demand currently doesn't support oil prices, but all that extra money? THAT sure does! This has actually been underscored recently when recent rumblings that the Fed could cut back on quantitative easing prompted big and really sudden drops in commodity prices. Actually, it happened last week, come to think of it. I wrote a couple of articles about it.
Is there a moral problem with that? Yes. Yes there is. You know there is. In fact, we basically agree about that. What I object to INCREDIBLY strongly is the idea that countries who run deficits are somehow morally bankrupt, while countries that don't are somehow morally superior. That is an incredibly puritanical concept and it's one that is used ALL OF THE TIME when people talk about the current economic climate. Countries fall in to arrears for all sorts of reasons -- sometimes for really good ones -- and pretending that all debt is bad and all surplus is good is ridiculous.
What it all comes down to what qualifies as an acceptable level of debt, doesn't it? Who decides that? You? The government? The bond markets? For the last four years, people have said that deficit spending is something we have no hope to repay, but it's predicated on a fundamentally flawed idea - namely that growth has infinite potential and yet somehow there is a finite level of acceptable debt. Quite frankly, that essential misconception is the most insane part of the whole argument. The idea that the same rules that apply to debt amongst individuals applies to nation states is extremely flawed. There is no lifetime cap on nation state earnings - they can grow as far as the innovation of their people and businesses can take them - whereas there is a cap on what people are capable of earning and repaying within a lifetime. Debt is a huge weight on the agency of the individual, but it is arguably less of a thing for most nation state governments UNTIL THEY MAKE IT ONE. Greece would be in a much better position if they were able to structurally adjust out of it like a normal economy, but since they're tied to an incredibly draconian monetary policy, they're mired in the opposite of growth and a spiralling debt problem they will never be to pull out of until the economy grows.
People have been warning about borrowing costs in the US and UK for YEARS, and their justifications for why they haven't spiralled out of control have evolved and shifted and gotten increasingly weird, and the dire predictions have continued unabated. They haven't spiralled out of control. Perhaps that's to do with low growth, perhaps that has to do with asset purchasing, perhaps it has to do with the fact that bond vigilantes are a made up concept, the explanations are pretty endless. The fact is they haven't spiralled out of control, so the fact that people think they could someday is kind of a moot point.
No comments:
Post a Comment