The Decline (and fall?) of Western Civilisation. Part one: credit.

Posted: Sun 27th November 2016 in Blog

Everyone knows that 2016 looks like being a disaster, and blame is being thrown around. I am afraid my confidence in the future and humanity is at an all time low. Lets look at where we are, where we are going how we got here.

The Decline (and fall?) of Western Civilisation. Part one: Credit.

2016 has been an absolute train wreck, but like most train wrecks it’s caused by a series of innocuous events way back that in themselves seemed un-important. I saw some of this coming some of it not.

The trouble as I see it was laid down in the 70s – that Idea was pretty simple. Lend people money to buy things. My Grandad was a bank manager, his job was to NOT lend people money, funny how life has changed!

Any way growth rocketed the consumer economy was born and the older middle class folk, who weren’t able to borrow before and had savings watched their savings and pensions grow. The problem nobody really saw were not immediately apparent, in the 80s when the manufacturing jobs in the UK went the working class without saving were sort of screwed and the rich poor divided starts to widen, it goes like this.

Pre easy credit you made a thing, dug up a thing or did a thing and used the money to buy other things. Now of course you borrow the money to buy a thing, this pushes up the price of things (demand) and you pay someone interest on the money you borrowed. The person who had the money in the first place makes really doesn’t have to do a lot, but the money they had they keep and they get more off the people who couldn’t afford the thing in the first place. Simples.

Meanwhile the consumer has to pay more for the thing and pay interest. If he doesn’t keep up payments on the thing then he losses the thing and any payments for the thing. This leads to a very poor negotiating position with employers and downward pressure on wages.

If you want an example of this its house prices. They go up because people want to buy them, by increasing the amount of credit available to purchasers they can borrow more money, which means more demand, higher house prices, which means bigger loans.

Obviously its much, much less effort to make money this way than to make things or dig things out of the ground or farm things. Its also much more profitable.

By Jirka.h23 - Own work, CC BY-SA 3.0, Link

Anyway the net result is what we’ve had for the last 40 years, great growth, increasing instability and the massive divergence of the rich poor gap. This kind of hit the buffers with Global Financial  Crisis. You could look at it this way, there’s been no meaningful grown in the UK for 40 years, it was all loans.

Now lets get into the blame, the system I described has become institutionalised, when the GFC came along credit dried up, by this time the western world’s main economical driver is credit. There are exceptions, Germany, Australia etc. They still have well paid jobs, related to making things or mining things where people are earning and spending. But generally speaking everything stopped, I said at the time that I saw a decade of stagnation in the UK, I may have been optimistic. Governments ‘stimulated’ in the UK’s case they gave the rich lenders (the banks) a load of money to lend. Which they didn’t.They didn’t see the profit in lending more money to people who couldn’t pay them so they pocketed it. The Ausies did better the gave everyone a cheque and told them to shop. This money went in to the local economy at the bottom and flowed through, the UK stimulus resulted in a massive hike in classic car markets and a boom in the Super Yacht industry. Meanwhile at the other end of the economy workers’ rights are being destroyed by the clever people in silicon valley. Zero hours contracts, claiming people are contractors not employees. So here we are in 2016. The Super Yachts are booming, the manor houses of the 21^st century. Anyone under the age of 25, if they have a job, its without holiday, pension or benefits and probably part time to boot. The political establishment hasn’t even realised the system has broken down. The failures in the system aren’t being talked about, instead globalisation, immigration, trade are being blamed. Obviously these new jobs don’t come with pension funds, so no savings.

I own your hospitals.

All of the above is mixed with the Globalisation and the rise of technology, currently the UK spends 4% of UK taxes on dept. That’s not much, obviously it’s a rather nice return if you’re the idle rich.

By User:Splash (see page history for earlier versions by w:User:SebDE, w:User:Wereon) - Self-made (see page history for earlier revisions), CC BY-SA 3.0, Link

This will go up, I’m actually quite surprised how small it is. I’m sure there’s no nasty blackmailing that goes on behind the scenes. I’m not sure if this includes the “off the books accounting” that goes on, for instance the bits of the UK infrastructure I own. Yes me! You see I have “Superannuation”

 This is Australia’s equivalent of National insurance, only its real investment, not a pyramid scheme. In Australia you pay in and it is invested in stuff. Dumb governments, foreign and domestic need to borrow big for infrastructure, they borrow it off us. That’s $2 Trillion dollars invested. There are other funds as well, some countries run sovereign wealth funds countries invest their money this way, there’s a list here,  this is who owns you – mostly its China. Us Aussies have a bit put by too. Pommies don’t.

The Island of Niue has decided never to borrow again.I’ve never borrowed either, I’ve been lucky, in some respects, but no one’s gotten rich off me for free. I appear to now live in a country that at least tries to live within its means, but the moral of this story is don’t borrow.

Its too late for that now. Anyway, we the western world decided to take the easy way to a fast buck for 30 years we reaped the rewards, now we’ll have to pay what we owe. Thank god I was able to emigrate to one of the less dumb countries, but that door is closing as the immigration doors are coming down around the world with the rise of the right. I am hoping, horrible as it sounds, that Australia can dig its self out of debt and the UK will have to support its own people, while I take a cut from all those British bridges, PFI hospitals etc that I own. The Chinese and those pesky Norwegians will take the lions share obviously.

Mr Trump is ending austerity, hoping to bring back the growth that will cancel out the debt, meanwhile I’m sure my super fund will lend him (at a very favourable rate) the money he needs for all those now bridges and stuff. God I love globalisation.