Debt, the prolific mother.
December 3, 2012Posted by on
Debt is the prolific mother of folly and of crime – Benjamin Disraeli
The Market Oracle has published an article focussing on Britain’s debt dynamics. With the title Bank of England Cancels Britain’s Debt, Budget Deficit Crisis is Pure Propaganda it deals with the political propaganda declarations for economic austerity by the Coalition government. Whilst the Labour party takes the opposite line, the reality is that there has been no real net economic austerity in Britain, as there has been no cut in government spending and hence the deficit continues to expand by about £120 billion per year. The reality is that the UK is immersed in an exponential inflation trend that results in the stealth theft of wealth to finance government spending for the purpose of buying votes.
No Debt has been repaid. Instead UK government debt continues to accumulate at the same rate as it would have done under a Labour government. The reason why interest rates are low is because the Bank of England is supplying the banks with cheap money and then buying UK government debt from the banks, thus forcing market interest rates down. The Coalition Government actions in terms of cutting the deficit have had no impact on UK interest rates because the deficit has not been cut and by the end of this financial year (2013), the deficit looks set to be higher than during the Coalition governments first year in office.
The UK Coalition government’s spending continues to grow each year which means that the deficit persists virtually unchanged. So far the coalition government has done nothing that the Labour government would not have done in terms of the debt. The total debt is expected to hit £1.2 trillion by March 2013 which is set against the March 2010 Labour budget projected debt of £1.19 trillion, which illustrates the illusion that there is any difference between the political parties in terms of debt and deficits.
Total government debt is actually over four times higher than the official public debt of about £4.8 trillion for 2012-13. In additional to public debt and liabilities there is also private sector debt of banks, corporations and individuals that is estimated to be between £6 to £8 trillion. Bankrupt banks alone are still sitting on approx £4 trillion of debt, thus total UK debt is estimated to be between £11 and £13 trillion. Instead of the deficit falling to around £90 billion for 2012-13, the government will be luckily if the deficit comes in under £130 billion. Furthermore this trend for expanding deficits is expected to persist going into the May 2015 election as the Coalition government ramps up government spending to buy votes, therefore there is a high probability that the deficit could yet expand further, the net effect would be for a total accumulative additional budget deficit of well over £200 billion more than government expectations.
The Public sector comprises some 50% of the economy that acts as a noose around the economy that strangles competitive industries and entrepreneurship, because one cannot compete against subsidised public sector services that exist purely to accumulate debt. Many may argue the case for economic austerity reducing the size of the public sector, however all that has happened is that services have been slashed in an attempt to retain as many of the public sector jobs as possible, thus leaving diminished funds for actual front line services.
Inflation is a requirement for the Debt Based Economy, this is how governments keep putting off the day of reckoning by inflating the debt away and then borrowing more money to service the debt interest which is why virtually all money in an economy is debt money that will never be repaid. [Market Oracle]