More Worrying Figures and a Challenge for Labour.

This Blog, as regular readers know, approaches economics in a more fundamentalist way than many sophisticated commentators and economists, who in their wisdom, pass the understanding of ordinary people. Thus there is a culture which says ‘I am not an economist, so I will leave it to them’. But everybody is a basic economist. We all have to run our personal budgets, so we all know those basics. In the fifties and sixties politics were dominated by the phrase ‘cost of living’ whereas today ‘fiscal deficit’ and ‘quantitative easing’ fly round the airwaves and people do not listen.

Eventually things reach the point where the issues are so big everybody understands, as in Ireland. It comes as a shock. People feel betrayed, conned even. This is why they are marching in Dublin and the government totters. Meanwhile the hard nosed officials from the ECB and the IMF drive a very hard bargain which will squeeze the poor, the middle and the better off, for years. Not only that, Ireland has lost a good chunk of its precious sovereignty, hard won in centuries of struggle. That would hurt any country but it hurts the proud Irish people more than most.

Over here the Coalition has gained the confidence of the markets. Our manufacturing and exports are rising and there are good signs that the private sector is expanding to create a better economic model, in which we borrow less, earn and save more, make what we use and sell overseas more than we consume at home. There is a long way to go, but our Chancellor has surprised everyone by his competence and is on the right track. So should we, in the UK be worried?

Yes we should. We have to do much more than engineer a recovery. We have to create a Tiger Economy growing at between 5  and 7 per cent per year. Bulldog economy would be a better term for Britain, but whatever we call it we have to do it. AND we have to do it on earned money, not borrowing, and without inflating assets beyond their worth. Indeed we have to reduce the value of housing relative to everything else. To do this we have to think out of the box and release the vast potential, crippled for decades by the dead weight of the public sector, of the British people.

Why? Because of the figures. They are very simple. This Blog has presented them before, but will now put them into persective. The last official figure for total external debt of the UK, including private, business and government, was $9.08 trillion. This was more than all the foreign exchange reserves held by all countries in the world put together. They are the figures from the IMF for June 2009. Since then they have grown and are growing still. The only country in the world to owe more is the U.S. at $13.5 trillion. But the GDP of the US is 7 times bigger than the UK and its population more than 5 times bigger. The next country in line is Germany, owing half as much as we do, with a bigger economy, more people and a huge surplus balance of trade. 

If Labour wants to appear other than silly on its economic pronouncements it has to come up with some answers. It was on its watch that this catastrophe was created under the gleeful slogan ‘an end to boom and bust’. It has taken us nearer than we have ever been to the end of everything.