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War Debt! Huh! What is it good for?

Gosh, I’ve neglected this, haven’t I? This is part of the general crisis of confidence that makes up my life, so don’t worry.

So, a short thing about debt. It’s commonly bandied around that the UK, thanks to Labour’s profligacy, is the most indebted it has ever been.

It’s technically true that the UK holds an astounding amount of debt; something in the order of 492% of GDP. But what is elided here is that it is mostly private-sector debt, largely due to the financial sector’s very large role in the economy, and the recession caused by the crash. Labour may, indeed, be partially responsible for that by looking the other way whilst the real-estate bubble continued to grow, but then, so did everyone else. Does anyone really believe that the Conservatives would have introduced and enforced the kind of regulation necessary to prevent the bubble? Then look over here, I’ve got a rail franchise to sell you.

The argument that’s being made, though, is that Labour spent too much money and that is what has done for us. Bear in mind that the current level of net public debt is something like 60-65% of GDP, a piddling amount in comparison. This is argued to be an incredibly high level of debt which will lead to default, misery, and the ruination of everything we hold dear, especially your granny.

Except this is what debt was like from the beginning of the 20th century to the present day:

How bloody tiny does our “Debt Bombshell” look!

The next fallback is that it only during wartime that we ran up so much debt, so there were special circumstances that are unrepeatable now. This is true, up to a point: part of the reason the WWII spike is so high is that the US was lending the UK shedloads of money in order to keep the UK viable. It’s unlikely the same would happen today, in these austere times.

But here’s debt from the interwar years, 1918 to 1939:

Debt remained well over 100% of GDP throughout the inter-war years, yet strangely enough, there was no massive debt default. Why was the debt so high? Because of a long, miserable depression from 1918-1936. The UK never had a Roaring Twenties, just a horrible, grey 18 years. There may be institutional reasons why the UK was able to run such a high debt; it was the centre of the financial world, after all, and as a highly developed nation no doubt creditors were willing to give it the benefit of the doubt. Much like today, when the markets are basically saying “Dear God, why aren’t you spending money! Spend money now! Today! Please!”

But, of course, that kind of market signal just isn’t what we’re looking for, is it?

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A slight return to our regularly scheduled programming.

Well, bugger, I’ve neglected this, haven’t I? I do apologise. I am an unreliable sort.

As a return, here’s, as usual, a slightly half-formed post with an economic tinge.

I’m often torn when it comes to the matter of modern financial capitalism. Considering the utter rottenness of the edifice, part of me wants to go full wild-eyed anarcho-communist and actively tear the whole goddamn thing down. Watch it burn. This would be tremendously satisfying, a propaganda of the deed on a mass scale.

It’s also thematically satisfying, I guess, since our financial overlords hold what is essentially an economic timebomb over us all; without the effective regulation needed, there is no safeguard against another major financial crisis in the future. Sometimes, when in a drunkenly belligerent, political mood, I have described Wall Street as functionally equivalent to terrorists; using economic violence, and the threat of economic violence, to their own benefit. I was only half-joking, largely because terrorism is usually the tactic of the politically and militarily weak, rather than the powerful, who can easily employ much greater force, and much greater destruction.

And that’s where the problem lies; the destructive force of a financial crash would hurt the self-described Masters of the Universe, it’s true. As individuals, some, perhaps many would be reduced to bankruptcy. Others would find their wealth, their source of credibility, greatly denuded. The status of financial capitalism as a whole, as the giant which it is almost impossible to tackle critically, would possibly be destroyed outright. It would make sane reform much easier. But it would hurt so many people as collateral damage, honest hardworking people whose only vice is believing that the American Dream will, in fact, give the sucker an even break. And I couldn’t do that, even if I had the capability. I couldn’t immiserate that many people, just to shatter their illusions about what the financial elite are doing to ruin their livelihoods and their nation for generations to come.

And so the illusion continues; and due to the survival of modern financial capitalism thanks to things like TARP (which is an incredibly successful, competently administered program, in terms of what it set out to do and what it has accomplished) and the American stimulus bill (similarily, with the caveat that it was much too small and wrongly focused to have the necessary effect on demand hoped), means that it managed to get away with causing the crisis relatively untouched, and even managed to eventually deflect the criticism to government spending. The crisis suddenly became the fault of modern society’s bete noir, the overbearing, statist, bureaucratic government and the amount of debt it held, despite that debt largely being a function of a) the recession, as tax receipts fell and benefit claims rose as a result of the financial institutions’ malfeasance, and b) how much it cost to make sure the little fuckers didn’t take us all down with them, Lehman Brothers style. And so the enemies of growth became not the unstable financial sector and the house price bubble, but benefit cheats and public services. A familiar story, if not a truthful one, and I can only hope Clegg, Osborne and Cameron’s tongues blacken, swell and choke them as a karmic result of the continual mistruths and false, pious stories told in lieu of data to support their claims.

It actually reminds me a little of a specious argument made to me about climate change. It was along the lines of “We probably don’t have to do anything, it’ll probably resolve itself. Who’s heard of the hole in ozone layer anymore?”

Of course, the reason we don’t hear about the hole in the ozone layer any more is that we bloody well did something about it. That argument really made me despair a little. There’s a significant body of people who seem to be ignorant of the processes of government and how we resolve issues, and seems to take it as given that some problems are eternal, or will be worked out on their own without any real contribution from anyone.

The next financial crisis will come, and it may come soon. Ironically, it may develop out of the ashes of the last financial crisis, merely proving what a gigantic clusterfuck that was for everybody involved. Sorting out the twisted, complex, and sometimes fradulent financial instruments which were responsible for the mess we’re currently in could cause the great houses of capital to collapse inwards again as investors realise to what scale they were had and as houses are taken away from homeowners who are supposed to take the banks at face value when they say they have to foreclose, without any corroborating paperwork.

And what happens when it comes? Another bailout, another increase in debt held by governments in order to weather the storm of collapsing financial institutions, more slashing of public services as the primary function of government becomes the stabilizing wheels on a careening, wonky unicycle of finance, rather than, say, the general welfare of its’ citizens, until the kind of governments that we know in the developed world, mostly stable, mostly liberal, mostly democracies, could collapse under the weight.

I’d like to hope that won’t be the case, that as with Marx’s predictions about the death-throes of capitalism merely being its’ birth-pangs, we learn from our mistakes slowly and painfully,  still fumbling our way towards a tolerably humane society. But I’m not holding my hopes up just yet.