Painful times ahead

I recently read an article recommended by Tim Duckett, one of the talented Headshift alumni who I maintain a level of weak-tie twitter contact, and in it John Lanchester puts into perspective just how much of a financial mess the UK is:

Cuts of that magnitude have never been achieved in this country. Mrs Thatcher managed to cut some areas of public spending to zero growth; the difference between that and a contraction of 16 per cent is unimaginable. The Institute for Fiscal Studies – which admittedly specialises in bad news of this kind – thinks the numbers are, even in this dire prognosis, too optimistic.

What does that mean? According to Rowena Crawford, an IFS economist, quoted in the FT: ‘For the Ministry of Defence an 18 per cent cut means something on the scale of no longer employing the army.’

Later on, touches on just how unjustified the ridiculously large bonuses in the last twelve months really are:
This year, the levels of bonuses across the industry are unconscionable…thanks to the special measures currently in place the banks can borrow from their governments at, effectively, 0 per cent rates of interest. They can then invest the money at higher rates of interest, 5 to 7 per cent, say. This is a direct transfer of wealth from the taxpayer to the banks, and the only difference between it and an actual, physical licence to print money is that the banks don’t have a piece of paper with the words ‘Official Licence to Print Money’ written across the top.
The main point in the article seems to be that no matter which party wins this year, Britain’s financial situation is so dire that that most decisions a government could take have essentially been taken by the the bond markets that they’ll be beholden to.

It's a pretty depressing message, and the best he can do to find a upbeat ending is that the bonuses this year are so grotesquely huge, that they might represent bankers realising how broken the system is, and frantically last suppering before the public wakes up to this behaviour, and starts collectively calling for some effective regulation:

The proposals now being touted do not guarantee systemic safety, but taken together they will, for sure, make the system much less profitable. Maybe, just maybe, the bankers are pigging out this year because they suspect this is the last of the good times. If we’re looking for a glint of silver lining, does that count?
Jon Lanchester's writing doesn't leave you hopeful about the future, but he does write brilliantly (I think the correct phrase is entertainingly depressing) - go read it, it's a nice break from the ridiculous BigotGate coverage that's saturating the press right now.

Copyright © 2020 Chris Adams
Powered by Cryogen
Theme by KingMob