The West has spent the last 30 years living beyond its means and borrowing from its future (and its children and grandchildren). It was obvious even 20 years ago that we were living in a fool’s paradise (Gordon Brown’s “no more boom and bust” was one of many clues).
The necessary corrective recessions were all largely ducked and the debt crisis “fixed” by issuing more debt and printing record amounts of money.
Why is anyone surprised when the bill falls due and the debts must be repaid ? If stagflation is the only corrective medicine to reset things back to sanity, then that is what we must endure.
Or were people expecting a free lunch ?
CAn anyone honestly say they weren’t warned long ago ? Yes, the politicians and media kept pretending everything was fine, but we figured out long ago they don’t know what they’re talking about.
The main problem is that the generations that caused this will largely avoid any of the pain. They’ll be comfortable in their overpriced houses they bought for peanuts while the youngsters will be left with high inflation, decrepit privatised public services in dire need of investment, house prices increasingly out of reach and job losses, stagnant wages and insecure employment
As I have said above, Government debt in bond form is an asset for investors, and has a supply demand safety valve as well as price/ yield cap and collar, which move in different directions
This is very true. But the problem (as I tried to point out) is that fiscal policy is also tightening rapidly, which will slow down the economy even more than most now anticipate. That’s why I think the recession could be particularly nasty
R Wright
1 year ago
Living standards will drop and never recover. All part of the west’s managed decline as we prepare for increasing subordination to multinational organisations and technocrats while weak elected politicians take all the blame.
Brendan O'Leary
1 year ago
“a self-inflicted 1970s-style stagflation cycle ” is probably the best we can hope for, given current governments’ fear of even short-term political pain.
Nicky Samengo-Turner
1 year ago
Lack of understanding of global bond markets, associated derivatives and the advent of electronic markets makes so much comment on this subject at best erroneous. The days of banks being able to simply raise interest rates at a whim due to simplistic economic ( mainly industrial output/employment/wage demands) is long gone, as interest rates are effectively governed by long government bond pricing/yields, so central banks have to react to out of kilter supply/demand pricing.
Perhaps the most worrying ignorance is the ” man in the street” complaint about government borrowing/ debt, not actually knowing that the majority of his pension and life insurance is invested in the debt… precisely because government bonds are actually an asset.
I am also pretty sure that most politicians and Ministers have not a clue about any aspects of economics, let alone capital markets
Paul MacDonnell
1 year ago
This article is all over the place. The problem with the 70s wasn’t too little government spending but too much.
The solution begins with the need to increase interest rates and drastically. It is wasteful government spending that has caused the problem. It also must be cut so that economic resources can be allocated by the market (i.e. the people) and not by politicians.
No current government, “conservative” or otherwise, has the guts to increase interest rates drastically.
And media drumbeat, insisting that raising interests rates would be disastrous , has become a cacophony.
So to save inevitable short term pain, and political unpopularity, we and our children and our children’s children are being condemned to long term disaster.
as I have said above, Governments cannot simply raise interest rates, as in past times, and modern economics are NOT the same as the 1970s,
J Bryant
1 year ago
This article captures our economic situation quite accurately, imo. There are plenty of similar articles out there all busily diagnosing the problem. What about solutions? How do we crawl out of this hole? Clearly higher interest rates are now necessary despite the economic pain they’ll cause. But what else can we do for long-term, stable economic growth? I can find few articles addressing that question.
The solution is the crash. It can’t be alleviated because QE, the ‘fix’ last time is now no longer available since we’ve been addicted to it ever since
…we’re in a social and economic governance interregnum across what is now a technologically joined up and economically integrated world.
The governance model of nation state representative democracy, is losing its status as the default format, because it does not/cannot intrinsically map current and foreseeable social and economic realities on the ground and in the ether. (Notwithstanding the reprise in still-to-catch-up Eastern Europe right now).
And the likely way ahead is not nation states being overtaken by centralized world wide or even EU style regional geographic governance. That model too is at odds with the centrifugal effects of a technologically joined up world, in which human and productive capacity and capital are mobile (digitally if not physically) and incentivized, cross culturally, to seek the best returns.
Sovereignty and governance may become detached from strictly geographic divisions, into smaller aggregations, something more akin to the old Hanseatic trading league, the medieval Knights of Malta etc., the old Southern European and current Asian/Middle Eastern city states, as well as new community formats based around digital communications and finance.
In other words, a diverse “market” for governance and sovereignty, in which the participation franchise will comprise voting with your physical and or digital footprint, and in the occasional Swiss style referendum.
The emergent chaos has a long way to run but.
Hardee Hodges
1 year ago
As we watch interest rates rise, we will also see government outlays to service that debt must increase else the government faces default and currency collapse. Given all the major nations have rather huge debts so they will face higher servicing costs. Most governments can extract revenue to a point but really are at some limits even now. What will happen to those people who have become dependent on government transfer payments?
We might see great unrest and anger at past squandering and resource misuse. Very choppy waters ahead.
trevor fitzgerald
1 year ago
Weren’t we told inflation was a good thing and central bankers should be happy that they have finally dug us out of our deflation hole and all that debt will be inflated away?
The West has spent the last 30 years living beyond its means and borrowing from its future (and its children and grandchildren). It was obvious even 20 years ago that we were living in a fool’s paradise (Gordon Brown’s “no more boom and bust” was one of many clues).
The necessary corrective recessions were all largely ducked and the debt crisis “fixed” by issuing more debt and printing record amounts of money.
Why is anyone surprised when the bill falls due and the debts must be repaid ? If stagflation is the only corrective medicine to reset things back to sanity, then that is what we must endure.
Or were people expecting a free lunch ?
CAn anyone honestly say they weren’t warned long ago ? Yes, the politicians and media kept pretending everything was fine, but we figured out long ago they don’t know what they’re talking about.
The main problem is that the generations that caused this will largely avoid any of the pain. They’ll be comfortable in their overpriced houses they bought for peanuts while the youngsters will be left with high inflation, decrepit privatised public services in dire need of investment, house prices increasingly out of reach and job losses, stagnant wages and insecure employment
As I have said above, Government debt in bond form is an asset for investors, and has a supply demand safety valve as well as price/ yield cap and collar, which move in different directions
This is very true. But the problem (as I tried to point out) is that fiscal policy is also tightening rapidly, which will slow down the economy even more than most now anticipate. That’s why I think the recession could be particularly nasty
Living standards will drop and never recover. All part of the west’s managed decline as we prepare for increasing subordination to multinational organisations and technocrats while weak elected politicians take all the blame.
“a self-inflicted 1970s-style stagflation cycle ” is probably the best we can hope for, given current governments’ fear of even short-term political pain.
Lack of understanding of global bond markets, associated derivatives and the advent of electronic markets makes so much comment on this subject at best erroneous. The days of banks being able to simply raise interest rates at a whim due to simplistic economic ( mainly industrial output/employment/wage demands) is long gone, as interest rates are effectively governed by long government bond pricing/yields, so central banks have to react to out of kilter supply/demand pricing.
Perhaps the most worrying ignorance is the ” man in the street” complaint about government borrowing/ debt, not actually knowing that the majority of his pension and life insurance is invested in the debt… precisely because government bonds are actually an asset.
I am also pretty sure that most politicians and Ministers have not a clue about any aspects of economics, let alone capital markets
This article is all over the place. The problem with the 70s wasn’t too little government spending but too much.
The solution begins with the need to increase interest rates and drastically. It is wasteful government spending that has caused the problem. It also must be cut so that economic resources can be allocated by the market (i.e. the people) and not by politicians.
No current government, “conservative” or otherwise, has the guts to increase interest rates drastically.
And media drumbeat, insisting that raising interests rates would be disastrous , has become a cacophony.
So to save inevitable short term pain, and political unpopularity, we and our children and our children’s children are being condemned to long term disaster.
as I have said above, Governments cannot simply raise interest rates, as in past times, and modern economics are NOT the same as the 1970s,
This article captures our economic situation quite accurately, imo. There are plenty of similar articles out there all busily diagnosing the problem. What about solutions? How do we crawl out of this hole? Clearly higher interest rates are now necessary despite the economic pain they’ll cause. But what else can we do for long-term, stable economic growth? I can find few articles addressing that question.
I believe the reason people aren’t proposing solutions is because nobody has any.
The solution is the crash. It can’t be alleviated because QE, the ‘fix’ last time is now no longer available since we’ve been addicted to it ever since
…we’re in a social and economic governance interregnum across what is now a technologically joined up and economically integrated world.
The governance model of nation state representative democracy, is losing its status as the default format, because it does not/cannot intrinsically map current and foreseeable social and economic realities on the ground and in the ether. (Notwithstanding the reprise in still-to-catch-up Eastern Europe right now).
And the likely way ahead is not nation states being overtaken by centralized world wide or even EU style regional geographic governance. That model too is at odds with the centrifugal effects of a technologically joined up world, in which human and productive capacity and capital are mobile (digitally if not physically) and incentivized, cross culturally, to seek the best returns.
Sovereignty and governance may become detached from strictly geographic divisions, into smaller aggregations, something more akin to the old Hanseatic trading league, the medieval Knights of Malta etc., the old Southern European and current Asian/Middle Eastern city states, as well as new community formats based around digital communications and finance.
In other words, a diverse “market” for governance and sovereignty, in which the participation franchise will comprise voting with your physical and or digital footprint, and in the occasional Swiss style referendum.
The emergent chaos has a long way to run but.
As we watch interest rates rise, we will also see government outlays to service that debt must increase else the government faces default and currency collapse. Given all the major nations have rather huge debts so they will face higher servicing costs. Most governments can extract revenue to a point but really are at some limits even now. What will happen to those people who have become dependent on government transfer payments?
We might see great unrest and anger at past squandering and resource misuse. Very choppy waters ahead.
Weren’t we told inflation was a good thing and central bankers should be happy that they have finally dug us out of our deflation hole and all that debt will be inflated away?