THE MAP AND THE TERRITORY - A DYSFUNCTIONAL ECONOMIC SYSTEM POPULATED BY DYSFUNCTIONAL POLITICIANS It has taken a recent BBC World service news item about Greenspan who was head of the US Fed for 20 years to stir me to put pen to paper again. Why attention is given to him and many like him I do not know. He stepped down just 2 years before the financial systems of the world collapsed. He was a most influential force affecting economic and monetary policy during the fateful years of his tenure as Chairman of the Federal Reserve of the United States. Greenspan spoke to a BBC commentator ahead of the publication of his new book, The Map and the Territory. I neither understand why anyone would wish to read this book nor why any commentator would wish to write an article about him - unless this was to justly vilify him for getting everything wrong. The news report on his interview with the BBC included the following:- Mr Greenspan also defended his record at the Fed against criticism that easy-credit policies and light-touch regulation had contributed substantially to the 2008 financial crash. He also declined to criticise the financial derivatives market. He said: One thing that shocked me is that not only did the Federal Reserves very sophisticated model completely miss (the crash on) September 15th, 2008, but so did the IMF, so did JP Morgan, which was forecasting American economic growth three days before the crisis hit, going up all through 2009 and 2010. There is a difference between predicting economic bubbles, and predicting when they might burst This nonchalant attitude about the role he played in the events leading up to the financial crash is no surprise; it mirrors the same guiltless stance taken, at the time of the crash, by all the politicians and economic experts alike that they were not to blame, maintaining that as nobody saw it coming then how could they be expected to. The collapse of the banking system was the ground shattering event which preceded the crash of the worlds financial systems but was not on its own the cause. Yet the politicians and the economic experts were quick to place the blame on the shoulders of others, namely the bankers, rather than accepting collective responsibility for what went wrong. They then all quickly readopted their previous arrogant air of supremacy professing, once again, that they were all knowing and were the only ones with the capabilities to get us out of the mess that they had placed us in in the first place. Like all politicians before them, together with their cronies who are only concerned with their vested interests, they are only focused on clinging on to power. They will not adopt policies which would be for the long term good of the nation if that would make them unpopular with the electorate and thus not get re-elected. Instead they have become masters of spin and misinformation and engage in negative politics by placing the blame on previous administrations and the actions of others including nations over which they have no control. They will also bribe the electorate. This is another reason why national debts have risen over the past 40 years. What is of concern, is that it seems the electorate are willing to listen to them in the hope that their newly acquired expertise will deliver the right solution to their problems. Had any of them possessed just a small grasp of the fundamentals of economic reality they would have rung the alarm bells years ago and cautioned against marching with the Pirates of Wealth (wealth holders) into the unknown through the twin pillars of evil namely : de-regulated unfettered capitalism and globalisation. The bankers were not on their own in bringing down the worlds financial system they were just a part of the culture of corruption and greed spawned in the 1980s by the coming together of Thatcher and Reagan; who together formed an axis of economic evil which allowed for unfettered globalisation and introduced a free for all era of de-regulation. Greenspan merely carried on where Thatcher and Reagan had left off; and the insidious consequencies of these corrupt policies on millions of peoples throughout the world are sadly in evidence today. In Bangladesh workers have lost their lives working in unsafe factories for as little as $2 a day, and the high suicide rate amongst Chinese workers having to work 12 hours a day, 6 days a week on subsistence pay whilst the beneficiaries of their labours are accumulating vast tax free sums in off shore tax shelters and at the same time forcing up house prices in the capitols of Europe by scrambling to buy properties with their ill-gotten gains , making them unaffordable for the local people. This culture of greed and corruption is now no longer an intrinsic prerogative of the ruling elite and the Pirates of Wealth but has spread through much of the strata of society affecting the police ; the press; the NHS; care homes and many agencies and private companies which have sprung up through the privatisation of public services. The latest scandal to surface has been in the education sector where Free Schools and Academies have been allowed to provide education without following the curriculum which State schools have to adopt. There have been reports of financial irregularities and schooling provided by low paid inexperienced and unqualified staff. Nothing has changed since 2008, apart from austerity measures which have impacted on the vulnerable and marginalised sections of society; they are the victims. In 2013 we have the same ruling class supporting the same Pirates of Wealth exhalting the same senseless and bankrupt policies which led to the collapse of 2008. The real stories since 2008 are that earnings are not keeping pace with inflation; in real terms they are falling and have done so since 2009. Much has been said about the increase in the number of those working; most of the increases relate to part time working with over 1 million of those employed either seeking full time jobs or more hours. Another million workers have zero hours contracts meaning they have no certainty as to the amount they may earn. More workers than ever before are now earning just the minimum wage and have to rely on state benefits to survive; many of those on the minimum wage work for large international companies like Amazon who amass their profits in tax shelters and not only do they pay very little UK tax they look to the UK tax payers to subsidise the earnings of their employees thus boosting further their tax free profits. Recent reported improvements in GDP mask two important realities: GDP is still below 2008 levels, meaning the economy is smaller now than what it was in 2008 even though the size of the working population has increased each year since 2008; and that the National Debt has also increased since 2008. Some of the real stories which should be in the news rather than the publication of a new book by Greenspan are:- Banking: The banks on both sides of the Atlantic are likely to face over £50 bn in compensation payments from corrupt business across, it seems, all their business activities. These past profits generated large tax revenues and it is for this reason Governments probably turned a blind eye, being quite happy to share in the proceeds of the corrupt activities. Now much of these past revenues are being claimed back because of the losses the banks have since reported. The banks are not fit for purpose and are unable to support business as their business model is flawed GDP: The recent reported modest improvement in the UK has been hailed as an indication that the economy is on the road to recovery. This ignores the fact that the size of the economy is still 2.5% smaller than it was at the time of the crash in 2008. As the population has increased each year since 2008, thus the number seeking work would be more, the economy should have grown by 1.5% a year just to keep pace with the population increase. It would be true to say therefore that the size of the economy should be 7.5% higher than in 2008. The economy is therefore 10% smaller than it should be if it merely had stood still. The government revised forecast for increases in GDP of 1.5% per annum would mean that the size of the economy will never be large enough for living standards to be restored to pre 2008 levels. Sustaining a forecast 1.5% increase in GDP has to be questioned because announced austerity measures over the next 3 years are much harsher than the measures introduced over the past 3 years. The recent increase in housing activity, stimulated by the Governmenents various house buying schemes, has been the cause for much of the recent reported increase in GDP. House prices have been rising fast leading to fears of a housing bubble. If the government stimulus which has supported the increase in housing activity has to be withdrawn then the forecasted GDP increase of 1.5% looks very unlikely. UNEMPLOYMENT: The government has been citing recent modest reductions in the number of unemployed as a sign that the economy is improving. The facts underlying the unemployed figures are: there are still almost 1m long term unemployed amongst the young; there are 1m workers on zero hour contracts meaning that they have the anxiety of not knowing what there earnings will be; and there has been an increase to 1m in the number underemployed - those working part time but seeking full time work. In April 2013 there were nearly 3m workers in receipt of benefits - housing benefit and tax credits because their earnings were deemed to be insufficent. There are a further 2.m workers receiving the minimum wage not in receipt of benefits. The minimum wage is deemed to be 10% lower than the living wage. The worst of the governments proposed cuts in Public expenditure have yet to be implemented. The official unemployment rate of 7.7% would much higher if adjustments were made for part time workers seeking full time jobs. The adjusted rate would be around 9.5% compared with 5.0% in 2009. HOUSE PRICES: The Office for National Statistics reported in October that the average UK house price was the highest it has ever been. The figure is distorted by steep rises in London fuelled by overseas purchasors rendering it virtually impossible now for the average Londoner to buy a property. In expensive parts of London properties costing over 4m are mainly being bought by overseas investors. Outside London prices have risen in most parts of the UK . These increases in prices, running at 1.0% per month will soon negate the help available to first time buyers from the Governments house buying schemes. The ability to repay a mortgage has been made easier because of the historic low interest rates and were these to rise there would be many who would struggle to repay their mortgage. Rents also are rising reflecting the increase in house prices. This will impact on housing benefit payments thereby increasing government expenditure. As a proportion of income the UK has carried a higher burden of housing costs than that of most European countries and the USA. In Germany housing costs as a proportion of income are substantially lower. ENERGY PRICES: Despite wholesale costs being the same now as they were 12 months ago the big six energy firms are hiking prices by 10% once again, as if it is an annual ritual, claiming that OFGEM, the regulator who has raised concerns about the latest price hike does not understand the market. Profits per customer are set to double over the next 12 months. The energy firms have no competition and run no risk of making losses because of their monopolistic position; prices can be hiked at any time. The profit they make on their sales of over 5% would be the envy of many businesses operating in much riskier environments. The Governments response is to review Green taxes and Cold Weather Schemes; the latter benefiting those in fuel poverty rather than open up the market to proper competition or hold the big six to account by extending the powers of OFGEM so that they can intervene and properly investigate. Over 25% of households are now thought to be in Fuel Poverty. The definition of fuel poverty is when energy bills are more than 10% of the household income. It is probable that many of those in Fuel Poverty will also be struggling to meet property costs which are likely to be more than 50% of their household income. These households are likely to experience third world living and their numbers are likely to increase if property costs and energy costs continue to rise. At the same time that energy prices have risen substantially over the past 4 years so have the profits of the energy companies and the top salaries paid to their executives who have seen their pay rise by between 40% - 50%; some are now taking home £10 m per year. EARNINGS AND DISPOSABLE INCOME: Over the last four years, regular pay has increased at about half the rate of inflation, meaning real (adjusted for inflation) earnings have been falling at an average of 1.6% per year.This means that since 2009 real earnings are now 6.4% lower and with inflation currently at 2.7% real earnings will continue to fall. Inflation is likely to remain higher into next year because of proposed increases in energy and transport costs and the likely further increases in property prices. NATIONAL DEBT: Cameron and Osborne have been grossly misrepresenting the causes for the high UK National Debt. They seem to have successfully blamed the previous Labour administration for the poor state of the National finances. National debt has almost doubled to £1.16 trillion since they took office. National debt stood at £0.62 trillion when Labour left office and that figure included bank bailouts. National debt was about 42% of GDP in 2009 and is over 70% now and set to rise to 75% in 2014. The increase over the past 4 years is despite austerity measures and reflects falls in tax revenues. Debt ceilings - the amounts governments set to borrow have been raised by all the industrialised Western nations since the financial crisis and seem set to rise further; this means the amounts owed by governments will keep on rising. National debt levels in the West have been rising consistently since the 1980s when world trade was opened up to globalisation and de-regulation and gave the Pirates of Wealth a free rein over our destinies resulting in falling tax revenues and increased State expenditure on welfare payments to the increasing numbers left unemployed. There was a brief few years when the benefit of North Sea oil revenues compensated for this. North Sea Oil extraction has been dwindling over the past decade as stocks run out and revenues have been constantly falling and will not return to their previous high levels. I do not intend to read Greenspans book The Map and the Territory; the title, though, is interesting. The map could well be referring to how the World has changed over the past 40 years and the territory to those parts of the World which the ruling classes and their cronies the Pirates of Wealth are now free to exploit with impunity with no regard to the suffering they impose on countless millions. The map could also refer to how the World will be. If it were to view the territory of the UK the picture depicted could well be a territory where the bankers are still supported by the ruling class and the Pirates of Wealth, where any remaining control over utilities and energy supply would have passed also into the hands of overseas governments or conglomerates; a territory where most of the prime properties are overseas owned and where the infrastructure of the nation - the road and rail systems -along with the NHS prison and probation service will yield huge returns to overseas based profiteers operating in tax free environments. Democracy will be a farce because a bankrupt UK will never be able to wrest back control of its strategic assets and future generations of politicians will be powerless to change anything; they will be left with nothing to control other than a baying mob who would have finally come to their senses and the present ruling class would have been long gone from the country looking to find other opportunities elsewhere . This is not alarmist talk. Look no further than the recent announcement that the Chinese and the French will build and control the new nuclear power station at Hinkley Point; and a recent statement by Savilles (the leading property agent) that this year 35% of property sales in London have been to non UK residents from outside the EEC; this seems to cut across Camerons declared policy on immigration. The Government has already embarked on the privatisation of many parts of the NHS and is now proposing to privatise the probation service; the favoured providers G4S and Serco are now the subject of a criminal fraud investigation by the Serious Fraud Office for a systemic scam over many years against UK tax payers for charging for services not provided. Cameron has yet to pronounce on this amidst calls that no further contracts should be awarded to these companies. Several other providers connected with Back to Work schemes and Apprenticeships are also under investigation for charging for services not provided. The announcement about the HS2 new railway line linking north to south (likely only to be of economic benefit to London) costing £50bn, including rolling stock, does not include information as to who will build , run, or own it. The UK whilst a leading rail manufacturer in the 1970s does not now have the expertise to build the rail link or operate it. The expertise is now in the hands of the Chinese, the French and Spanish all of whom have extensive high speed rail networks. Globalisation meant that the UK decided to turn its back on manufacturing, instead it sought to find the lowest cost option anywhere in the World; it gave up control over its strategic industries leaving the UK vulnerable to corporate and governmental blackmail; and ceased to train the young preferring to obtain skilled workers from overseas. This is in stark contrast to the policies adopted by Germany, France and Italy. The UKs obsession of becoming the financial centre for the world led to RBS becoming the largest bank in the world and then having the largest pile of toxic debt at the time of the crash. The amount of debt totaling £258 bn equated to half of the amount of the national debt at the time and its bailout and the bailout of other UK banks helped swell the National Debt. Another recent item of news concerned a US Treasury report which criticised Germany describing its export-led growth model as incomprehensible. The US Treasury report said Germanys dependence on exports for growth was hurting the Eurozone and the wider global economy. The US Treasury said that Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germanys nominal current account surplus was larger than that of China. That is what happens when a country still manufactures and pays its way in the World. The same treasury report also criticised China for keeping its currency artificially high. That is what happens when a nation is protecting its own interest in the world by taking advantage of the free global market outside its own shores whilst at the same time restricting the rest of the world from selling their goods to them. Cameron said recently he wished to continue focusing on creating jobs and wealth for the nation. No new jobs have been created that pay a living wage and as for wealth that does not seem to be staying in the UK. An ex Bank of England governor said the problem with the UK is it is not competitive. This has been the mantra since the 1960s. Remaining competitive seems to mean working for less and less until our wages will be the same as that paid to the poorest in countries like Bangladesh. If this seems far fetched then consider the reavalation that major UK companies and the NHS have been staging job fairs in Romania and Bulgaria ahead of controls being lifted on 1st January next year over their nationals being allowed to work here. Many of the jobs offered are menial but not all; they are all, though, offering salaries at the lower end of the scale. So it seems jobs created next year will not only be lowly paid but also not for the unemployed of the UK. So living standards will continue to fall. A dysfunctional economic system upheld by dysfunctional politicians, where corruption and greed is accepted as being normal, will eventually lead to a dysfunctional nation full of dysfunctional people living in squalor and from which the ruling class and holders of wealth would have fled, having run out of spin, having no one left to blame and nothing left to bribe the electorate with. This would be a good description of the Map and the Territory future generations are likely to become accustomed to. 05-11-2013
Posted on: Tue, 05 Nov 2013 18:37:33 +0000
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