“The Rider on the Storm” Q3, Oct 2011
Economic Collapse Special
Editorial Welcome to issue 3 of this humble quarterly review. I never intended to write an editorial in any issue of this zine; my plan was to let the content speak for itself. But our remit is economics, social isues and current affairs and it has been an epic quarter on all fronts. We’ve had riots in England, the phone hacking scandal and closure of News of the World, (which cost hundreds of innocent staff their jobs due to the corrupt practices within the organisation, and also shed light on government’s dodgy links with Murdoch). Colonel Gaddafi went into hiding, the US raised their debt ceiling and had their credit rating downgraded, the stock market has been up and down like a yo-yo, Greece looks ready to implode any second and the whole of Europe apart from Germany seems to be on increasingly shaky ground. Just your usual three months on this ball of rock spinning round in space. And still we go on day to day without any obvious change. But underneath the surface, behind the scenes of almost every western nation, there is a frantic scramble taking place as the world markets look like they are about to go into 2008 crash mode all over again. The difference this time round is that governments don’t have enough money to save them. Economists are talking of global collapse, though they’re not getting any air time. Apart from a London commodities trader called Alessio Rastani who somehow ended up on the BBC talking about how “Goldman Sachs rules the world, not governments” and that “millions of people are going to have their savings vanish”. The BBC studio crew were shocked, frozen like deer in the headlights. Rastani shrugged “I thought everyone knew this stuff”.
Turns out everybody doesn’t know this stuff, but more and more people are waking up to it. In the UK, we have terrible growth (only 0.1% in the last 3 months), partly due to the global economy slowing down but made worse by the government cuts. We’ve had protests, we’ve had riots and all the factors that lead to these things are getting worse; unemployment is set to increase, wages are flat, inflation is rising. 12 UK banks had their credit ratings cut by rating agency Fitch in early October while Italian and Spanish government debt were both downgraded on the same day. The squeeze is on and is likely to continue for sometime. It seems pretty much inevitable that we will see an economic collapse in 2012. Now, a global economic collapse is too big to deal with in one article, so we’ve broken it down into a bunch of articles focusing on America, Europe and England. This editorial is an attempt to tie them all together with a common thread as they all affect one another and when one ship finally sinks, you can be pretty sure they all will; such is the nature of the global economy and the complex ties between sovereign nations in the young 21st century. If I had to sum up how this affects you day to day in the short term, I guess I’d say “hard times are ahead”; the squeeze is on and life on this isle isn’t going to be getting any easier for most of us for a while. Don’t panic though; a collapse may be intially painful but will likely lead to some kind of reset which will hopefully allow us to start moving in a new direction which is better for everyone. If what I’m saying in this zine is true, it’s better to be aware in advance than wait until it happens to find out about it. Stand firm.
Financial markets are driving the world towards another Great “Depression with incalculable political consequences. The authorities, particularly in Europe, have lost control of the situation. ” George Soros, billionaire investor & fund manager
What’s this economic crisis all about then?
America can’t pay its overdraft back The first thing I want to touch on is the US extending its debt ceiling, something which caused a big stink back in August. Running out of borrowed cash, the US government was faced with the decision of cutting spending, raising taxes, extending its credit, or defaulting on its debt payment. Defaulting was never going to be allowed to happen; that’s an admission of bankruptcy. Raising taxes wouldn’t be popular with working Americans, so was never going to happen; that would pretty much guarantee Obama losing next year’s election. The government wasn’t really prepared to reduce its own spending, so it opted to raise the debt ceiling and keep the cash flowing. Voila! Short-term crisis averted. But all they have really done is increase their overall debt, putting themselves deeper in the hole long term. It’s exactly the same situation as if you were hitting your overdraft limit every month and, instead of spending less to stop this happening, you just extend your overdraft. Or started paying for things with your credit card. Sure, you have cash flow short-
term, but you end up deeper in debt and have more to pay back more overall with no real way to do it. Sooner or later you’re going to face D-day. That’s where the US is headed right now. Those in the economic profession didn’t take kindly to the decision to raise the debt ceiling. Rating agency Standard & Poor’s reduced the US credit rating from AAA to AA. This is the first time a US agency has downgraded its own country’s credit rating. It happened because investors, nations and banks have less faith in the stability of the dollar, which is the world reserve currency, so whatever happens to the US is a global affair. As if you didn’t know that. Stock markets also tanked on the news. To demonstrate the global impact of the USA’s decision, here is a list of the 10 best ranking UK FTSE100 stocks the week after the US debt downgrade.
Top 10 FTSE 100 shares
weekly change w/c 11th Aug
Randgold Resources Unilever Standard Life Severn Trent Sainsbury’s Group Compass Group Marks & Spencer Reckitt Benckiser United Utilities Morrisson
14.94 -0.68 -1.81 -3.28 -3.32 -3.54 -4.07 -4.34 -4.35 -4.52
source: Money Week
Ok, we’ve all heard the chatter about how bad the global economy is, but with so much information flying around 24/7, it can be hard to get a handle on what exactly is going on. This has been a busyquarter for economic developments; with constant news and statements coming out from various governments and central banks around the world, keeping tabs on developments has not been easy. But I am about to embark on the impossible and try to break down where we are at and how things are likely to develop over the coming weeks / months, starting with the USA. Here goes...
As you can see, all but 1 of the 10 best performing stocks fell in price. That means the whole stockmarket, every share, except this one gold stock, went down that week! In case you are wondering, the worst
performing stock was gold old Royal Bank of Scotland’s, with a fall of nearly 25%.
Banks charging people to deposit money Stock prices fall because people are selling shares en masse. So where does all the money the sellers get from the sales go? Usually it would go into the bank while investors figure out what to do with it next. That didn’t happen this time though. The US banks put the word out that they were going to charge people to pay money in their accounts. But only people who were depositing huge sums of money; the kind of amounts that high flyers cashing out of shares have. This made it expensive for these investors to put money in the banks. The next safest option to putting money in the bank is buying government bonds, which is exactly what all the investors went and did. Bonds are a way, along with taxes, for governments to raise money - you lend money to the government for a fixed time period and they pay you back with interest; simple. So, all of this action was a co-ordinated attempt for the government to raise cash from the stock market instead of having to do unpopular things like raise taxes or cut spending. That might seem clever but this is really just more borrowed money which adds to the problem. The writing is on the wall; the US is broke and is resorting to the equivalent of scrabbling around the back of the sofa for some loose change. It doesn’t get enough revenue to cover its bills and is headed into an economic black hole. The only question is when?
So what? What does this all mean for the average person going forward? Nothing immediately, but the shift away from the unrivalled power and domination currently enjoyed by the US on the global stage has just taken a huge leap. Insiders and chart-
studiers have known how things have stood for a while, but it is now being made official and drawn into the spotlight of the media. Thousands of people are protesting on Wall Street as I type this. Awareness is growing. The difficulties the US faces are there for all to see now, open for discussion on the nightly news and in boardrooms across the world. It is no longer taboo to question the American way, and it is no longer unimaginable that their days as top dog on the global stage are truly numbered. The dollar’s chances of remaining the world reserve currency are looking increasingly slim. When international trade stops pricing everything in dollars, you know it’s game over. What will happen off the back of this and where power will shift to is hard to figure out at the moment. There is so much unrest everywhere in the world that it is hard to see to the other side of the situation at present. One thing is for sure though, the US is becoming increasingly exposed and vulnerable and its only strategy for dealing with this is to drag things out, rather than address its problems. That means a big problem further down the road. Like I say, the only question is when. Now, I just want to touch back on the idea of the government’s reluctance to reduce its spending. Plenty of other governments, such as ours, are taking austerity measures, why not the US? They have a HUGE military budget; $700bn, which is 5x larger than China’s (the world’s 2nd highest military spender) and 10x larger than France’s (world no. 3). The US defence budget accounts for just under 45% of all military spending in the world (see graphic on next page). Clearly they could make a pretty big cut to this without endangering their national security; they’re already streets ahead of the competition when it comes to war toys anyway.
Of course, war doesn’t have to be bombs and bullets; financial warfare seems to be the current method for controlling power. Strings get pulled, bluffs get called, debt get hidden away, repackaged and resold, people get hoodwinked and anyone who is not in on the game or tries to sound the alarm gets screwed. A good example of this is Deven Sharma, the CEO from ratings agency Standard & Poor’s, who got fired a couple of weeks after the US downgrade. That’s what you get for undermining the financial warplan instead of playing along. And when the economic control / warfare plan fails, what could be a more persuasive way to back up a failing argument? You got it - military might. Sadly, a collapse of US power seems inevitable sometime in the next few years and when that happens I expect bullets and bombs to start flying. Where and when, I don’t know; there’s too much current instability and noise to know where the ground will lie when it happens. I
If you want to know more: www.globalresearch.ca falseeconomy.org.uk
% World Total Military Spending 2010 (TOTAL: $1630bn)
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have a hunch, though, that the trigger for everything really going pear shaped will be when countries start trading oil in a currency that isn’t dollars. Before then though, we will see some form of social unrest and breakdown spreading across America, probably in the next 12 months. It has possibly already started; the “occupy” movement that began at Wall Street is now spreading to other US cities, so the sentiment for action amongst people stateside seems to be growing. We went from student protests to riots in England in about a year, so if that timeline is any guide, we should see the shit hitting the fan in the US some time next year. That timeframe seems to coincide with many economists’ predictions of when an economic collapse of some sort will likely occur. If the USA is in the mood for rioting when collapse hits, the whole continent could end up looking like the wild west. Stay tuned.
www.project-syndicate.org drudgereport.com
e: smallmodcons@hushmail.com
source: Stockholm International Peace Research Institue
The fact they refuse to make a dent in their gigantic military budget while in such dire straits and moving slowly towards a head-on collision with a pile of ticking financial timebombs leads me to suspect they know there’s nothing they can do and only have one plan for dealing with this when the shit hits the fan: War. “Turn your back on us at your peril. Let us carry on spending money we don’t have and don’t expect us to pay it back or blood will start to flow”. That will be their final threat. And who would dare challenge the US as a military aggressor? Nobody, hopefully; the consequences would be horrendous, but the threat and possibility of the US going to war in the event of a collapse hangs there all the same.
Up Shit Greek
Greece joined the Euro in 2001. It lied about its bank balance to get into the club. It didn’t have a strong enough economy of its own to match the big boys of the Euro and has been hanging on their coat tails ever since. It has never properly collected taxes from people so has never really had the cash to pay its own way. In short, it is the bad apple in the Euro cart. Everyone has figured this out now, since several bailouts were needed in order to meet its debt payments. And they’re still asking for more; taking out new loans to pay off existing ones. That’s not good. When Greece joined the EU it borrowed money from the European Central Bank. When it couldn’t pay those loans back it borrowed money from the IMF to keep itself afloat. Now it can’t pay either of them back. In fact, it can’t even afford to cover the interest on the loans. Estimates of just how much they owe vary but the Bank of International Settlements puts it at $485bn in its latest quarterly review. That’s more than their GDP (which currently stands at about $330bn) but the exact amount they owe is irrelevant here; what matters is that they can’t pay it back. Ever. Despite several rounds of harsh spending cuts, each one met by more extreme public protests, it is still unable to pull itself out of the quicksand and just keeps sinking ever deeper. Now there’s nothing left to cut and nothing left to sell so they have no way of raising cash and certainly no way of growing their economy. They are definitely going bust, ok. To get an idea of how bad Greece’s situation is, take a look at this graph of Greek 2 year bond yields. Government bonds allow
people to lend money to the government for a fixed amount of time and get paid back with interest. This is a way (along with taxes) that governments raise cash. Investors are usually happy to lend to governments as they are very reliable at paying you back, more so than banks, even, making bonds a relatively safe investment. This means bonds usually have fairly low interest rates. But, just like the world of bank loans and mortgages, borrowers who seem less likely to pay their loan back get charged a higher rate of interest to account for this extra risk - it’s called “pricing in risk”. Government bond yields work exactly the same way; the less stable or prosperous a country is, the higher its bond yields will be, as investors want a bigger reward for lending to a risky borrower. So bond yields are a good indicator of how financially screwed a country is.
Eurozone 2 year bond yields 2011
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With that in mind, the graph shows that their 2 year bond yield is currently nearly 70% and touched 80% last week. Typical 2 year bond yields for other eurozone countries are below 3%. That’s quite a difference. For every £100m Greece borrow short-term, they have to pay £170m back. That’s a very expensive rate to be borrowing money at; worse than your credit card! If they couldn’t afford to pay back previous loans at lower interest, how can they pay back these bonds at such
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GREECE
source: Bloomberg
What’s going on in Greece then? We keep hearing Greece being mentioned on the news. Lots of unrest but few details. Let me break it down.
The euro is nearing its ugly end. A collapse of monetary union “ now appears unavoidable. ” Stefan Homburg, head of Germany’s Institute for Public Finance high interest? They can’t. The fact Greece is even borrowing at these rates shows how desperate they are to have coins in the kitty. Here’s some irony for you though - the high interest rates of these bonds (created by perceived risk of Greece’s default) will ultimately be what causes that perceived risk to become a reality. So investors fears of Greece bankruptcy is what will make it happen. A self fulfilling prophesy if you will. By the way, that graph is logarithmic; if I’d have used a linear scale it would have been up near the top of the page.
No, doing that would cause the Eurozone to fall apart within a few months and that won’t be allowed to happen. How I think it will play out is that the rest of the EU countries will agree to write off some of what Greece owes them in order to take the pressure off the country. This will cause problems across the Eurozone as banks who were relying on getting their money back from Greece start to struggle. This could be any bank in any country, as it seems they have all been lending to Greece through those enticing high interest bonds.
But, whatever. The point is, Greece is going to declare default very very soon, it would seem. G20 leaders met the night before I wrote this piece to discuss how to deal with it. They made a statement which centred around “co-ordinated efforts” to solve the problem, implying another EU bailout but they gave no details on what the T&Cs would be and still seem to be arguing with each other, so it seems little is solved. I wouldn’t be surprised if Greece goes bust before this zine is published, such is the tempo of change with this thing. I say “go bust”; they already are bust, what I mean is that they actually admit it.
Obviously, no country wants to admit to be carrying this risk, so nobody is being very forthcoming about how they are tied up to Greece. Which makes it hard to work out how big the losses could be and what impact they will have on other EU countries when Greece does default. It’s a delicate balance; don’t give Greece aid and they definitely go bust very soon, causing a crisis which will destabilize the Eurozone, or keep bailing them out in an effort to paper over the cracks and hope a miracle happens, creating the risk that this continual draining of coffers of central funds will cause the whole Eurozone to go bust anyway.
So, then what happens?
Because this situation is such an economic tightrope, it is creating lots of panic in financial markets, not to mention on the streets of Europe. When it finally tips one way or the other, vast amounts of money will get swallowed up as all the potential debts become reality. Banks and other businesses will go bust and there will be bank runs in Europe as ATMS go empty. People will lose savings and jobs and mass unrest will follow. Information will become increasingly contradictory as attitudes get polarised, and volatility and swings in everything from news reports, public sentiment, stock markets and governments
I thought you might want to know that. Well, when Greece formally declares a default it won’t simply be a matter of them saying “we can’t pay” and then getting kicked out of the Euro. That would be an admission of defeat for the Eurozone. It would set a precedent for other EU countries who might one day struggle to make their own ends meet. If Greece was allowed to cut its losses and walk away, why shouldn’t they do it too?
e: smallmodcons@hushmail.com
will be the order of the day as confusion abounds.
A drop in global demand due will only make matters worse.
This is going to lead to mass unrest in Europe and if this thing rolls over to the US it could be the trigger that starts major upheaval there too. The signs are all there with the Occupy Wall Street movement continually growing.
In short, some sort of global economic collapse is on the horizon, and the Eurozone is likely to be where it starts first, with Greece being the canary in the coalmine. So, you know, you might want to start paying attention. And clearing your debts. And, because it’s highly likely that some UK banks could struggle on the back of all this, when you do see on the news that Greece has defaulted, you might want to go get a few tenners from the nearest ATM machine so you can still buy day to day items easily if the cash machines run dry. I’m not saying it will happen, I’m just sayin’. Prepare, relax & be well.
Luckily, we in England are not part of the EU and US economies, so we are shielded from all of this to some degree, but as the markets are global, you can rest assured it is going to impact us here. We’re already contending with cuts and riots and our own economic woes anyway, more of which elsewhere in this zine.
Unruly Britannia In the previous issue of this zine we featured a piece about political policing and their heavy handed approach to peaceful protestors. This was brought into sharp focus over summer when the riots happened. Riots which started in London, supposedly in response to a specific incident in Tottenham, soon spread to other cities suggesting the underlying cause was a bit more widespread than the local issues of a north London community. The initial reaction to the riots was incredible. The police, who have recently shown no hesitation in getting heavy with groups of peaceful demonstrators, just stood around and watched as shops were trashed, looted and torched. I think this soft initial police approach on the first night encouraged the rioting to escalate for a few days; people saw they could get away with it so more joined in the next night, and not just in Tottenham. David Cameron had to be dragged back from his holiday; despite several briefings on the situation he was initially happy to stay in Tuscany and let the whole thing blow over. Only after repeated phone calls did he realise how bad it would look if he didn’t come back and try to deal with the situation, then he finally got on the plane. To me, that says a lot about the man and his sense of duty and leadership. If he hadn’t come back, that would have been a serious dereliction of duty which would have led to justifiable calls for him to step down as PM. The fact he was so reluctant to return and deal with social unrest in our capital city is almost as bad. Like I say, it gives you a measure of the man. I watched the parliamentary session discussing the riots and was amazed as the politicians all shook their heads and shrugged their shoulders, saying it was a total surprise, nobody could have anticipated this disgusting behaviour, pure criminality, yada yada yada. They blamed the
police, they blamed an underclass, a sense of entitlement, a lack of respect. They blamed anyone but themselves. I can’t believe how out of touch they are. In our first issue of this magazine, printed in February 2011, I anticipated impending riots in England, writing: When the spending cuts start taking effect, don’t be surprised if the newly mass unemployed start uprising too. I mean, what else are they gonna have to do if there’s no jobs to keep them busy? It’s almost inevitable. It’s not going to get all Tahrir Square though. Not yet. Just a lot of noise, a few broken windows, some bad policing and hysterical media headlines. That’s the English way and the government know it. They’ll just hunker down, tighten their resolve and carry on. And that’s pretty much what has happened, so I can’t say I was surprised (though I didn’t quite expect the scale of looting, mainly because I thought the cops would be more full-on). We’d already seen growing public anger when the students got rowdy at the Tory HQ last November, and there’s plenty of people with much more to grumble about than students. I live in a city centre in England and I could feel the tension building over the last few months - subtly, but noticeable if you pay attention. I’m not writing this to blow my own trumpet, just to show the flaw in the government’s argument. If they didn’t see this coming they must be blind and incompetent. Either that or they knew that unrest was a likely result of their policies but merely view it as an unfortunate consequence of their agenda, pleading ignorance when it happens. Which speaks volumes about their attitude towards everyday people. If you think this government is looking out for your interests, think again; they are out to save their own skin and nobody else’s. That should be obvious by now.
Violent Protest So, what do I think caused the riots? Well, I don’t think they can be pinned down to one thing; several factors are involved and they obviously permeate English society far and wide. After the first night of rioting, the media blamed it on the Mark Duggan shooting. Once things spread to other cities it was obvious that wasn’t the case; the shooting was only a trigger, not the actual underlying reason for the unrest. Another way of looking at what the authorities dub “mindless criminality” is to see it as “violent protest”. Smashing windows or a phonebox, or keying cars is mindless criminality; when it comes to mass unrest, rioting and looting in a country being squeezed by government with a failing economy, I think “violent protest” is a more accurate description of what happpened. Protest at the marginalisation and lack of opportunity, and an expression of frustration at the lack of future prospects that is the reality for many people today. This situation didn’t happen overnight. It has taken years to get here. Years of neglecting sections of society by government, years of underfunding in areas that need it the most, years of a growing culture of greed and want, years of irresponsible lending and borrowing, years of encouraging people to buy stuff they can’t afford, years of breakdown of the family unit and fracturing of communities, years of declining education standards; the list goes on. You could break it down further to a micro level; what roles do things like a decline in families eating together at the dinner table, pop culture messages, product advertising, changes in the school syllabus, incentives to work etc. play in creating the factors mentioned above? To quantify and correlate these things is a task for some well funded think tank, not this humble publication, so I’m not going to try to come up with all the answers here. To me, the whole affair shows
a culture of selfishness, greed and ignorance which runs through our country. The self interest and greed of government and big business means they focus on their own gain at the expense of much of society. But we also see selfishness from people who are unwilling to work or contribute to society yet expect to still have everything they want. These are all symptoms of a culture of greed. One of things that struck me was, if the riots were an expression of frustration boiling over for a brief moment when the cops stood by and let people run wild, then how people chose to act during this window of opportunity was an indicator of their priorities and desires. A chance for freedom and glory. Living the dream, if you will. The fact the rioters chose to take advantage of the situation by breaking into shops and stealing iPhones, HD TVs and sportswear then torching their own neighbourhoods shows what a sad state of affairs this country is in; a golden chance to unite, take over the streets and make some demands of the authorities, and it was used to re-stock the wardrobe and get a bigger TV. That is depressing. It just shows how the material world we live in has got people in a trance - this opportunity for rebellion was used by people to steal a load of stuff they are told to want by advertising but can’t afford. That’s why I say it was an expression of frustration, not “mindless criminality”. However, if the rioters were really aware of the mechanisms which have created their frustrations, they wouldn’t be looting trainers and burning down carpet shops, they’d be marching on parliament and doing what Guy Fawkes tried to do. They’d be targeting politicians and banks, not shopkeepers and Footlocker. Like I say, the system has trained people to want *things* pushed through advertising. So, while the rioters probably thought they were being radical, they were really just showing that the system has got them trained, it just doesn’t give them enough
marbles to play with. With such little opportunity available for most people on no or low income, and the dark clouds of a decline in living standards on the horizon, you can see why looting is tempting to some when the opportunity arises. I’m not saying the riots were justifiable behaviour; to understand them is not to condone them, but I do think they were inevitable.
Popular reaction One of the common reactions I read in the press (usually coming from MPs and right-wing journalists) was that the looters displayed a sense of entitlement which runs through the ‘poor classes’ - ie. benefit claimants (known in the Daily Mail as ‘scroungers’). Now, I’ll admit that there are people who take advantage of the generous benefits systems in England and that there are people who have no desire to work a day in their life, and people who are responsible for their own unemployment, but there are also a large number of people who for various reasons are in legitimate need of state support. This attempted dig at people with low or no income is totally unfair and an attempt to smear lower earners as irresponsible and criminal, even. If you want to talk about a sense of entitlement, what about all the MPs who were caught scamming expenses in 2009? Or the bankers who claimed multi-million pound bonuses while having their banks bailed out by the taxpayer? Don’t they have an unfair sense of entitlement? Aren’t they expecting “something for nothing”? Like I say, the factors leading to the riots permeate society from top to bottom. Another popular reaction, this one from members of the public, was people calling for the army to be sent out. You’ve got to feel sorry for these people who feel so helpless that they want to see the army shooting its own citizens because the local branch of Currys is being raided. Let’s get one thing straight: our army is not there to shoot its own nation’s people; its purpose
is to defend them, not kill them to save the plasma screens, I mean, c’mon, do you know what kind of a precedent would be set by getting the army involved? Martial law. You actually want that? No, I didn’t think so. If the army had been called in, what happens next time there’s a peaceful protest or some UK Uncut style “direct action”? Should the army be there too, just in case it gets out of hand? And at what point do they decide it is out of hand enough for the army to take over from the police? When people get violent towards property, or when people get violent towards each other, or just when they won’t leave when asked by police to do so? No, going down that road is not a step forward, it would be a huge step back. If the problems building up to the riots were caused by the state bearing down heavily on people, bringing the army in would only make the situation worse. The police should have sorted it out sooner but they managed it eventually. The day we have our army on the streets prepared to fire at its own citizens would be a very dark day indeed; pure dystopian novel stuff. It was interesting to see the cops standing back during the riots. If you’ve been to a decent sized protest or seen footage of one, you’ll know the cops can be pretty over the top with how they handle perfectly peaceful protesters; getting rough with them for no reason and dragging them off to be detained without charge. It’s all an exercise to build a database on protestors while hopefully intimidating them into not attending future protests. It normally has the opposite effect, as you would expect. The cops have been heavily criticised for their overly aggressive tactics towards peaceful protestors in numerous protests of the last few years, and they used this as an excuse as to why they stood back during the first night or two of rioting. But you’d think the difference between baton-charging a group of people sat in the road singing a song and doing the same to a group of people breaking into shops would be obvious. Apparently not.
Wages are falling, rents are high and house prices are unaffordable; the government needs to start growing the economy and providing opportunity for the youth if it doesn’t want the country to descend any further into chaos. But at the moment it offers no solution, not even short term; just blame and punishment. You can see from the graph on this page comparing our GDP to the Eurozone’s that things don’t look good for us. Our GDP growth rate currently stands at 0.7%, less than half that of the slow motion car crash that is the Eurozone, whose current rate of growth is 1.7%. Note how the introduction of the cuts in October 2010 had an immediate negative effect, reducing our growth rate from above Europe’s during 2010, to below it today. And Europe, as I’m sure you know, is in a terrible financial situation, which just shows us what dire straits we are in. So things don’t look like they are picking up soon, which means we should expect more riots. As growth turns to decline and the underlying problems remain, it will get worse and rioting will be back in the streets and on your TV before long. It is now commonly accepted that today’s youth will have a
Cuts introduced here
Eurozone UK
Q1 2 Q2 008 20 Q3 08 2 Q4 008 20 Q1 08 20 Q2 09 20 Q3 09 2 Q4 00 20 9 Q1 09 2 Q2 010 2 Q3 010 2 Q4 010 20 Q1 10 2 Q2 011 20 11
So, where do we go from here? Well that depends on what the government does next and how it reacts to this act of desperation from the most marginalised members of our “big society”. Things aren’t looking good. They say there’s two ways of creating incentives to get people to do something; the carrot and the stick. One of the most alarming government responses to the riots was to threaten eviction to any council tenant who was caught rioting in future. That’s the stick, but there’s no carrot. Where is the offer to create opportunities for people to move into gainful employment with good opportunities and be able to buy stuff instead of steal it? What happens if someone gets evicted from their home? Does that solve a problem or create one?
% Change GDP year on year 3 2 1 0 -1 -2 -3 -4 -5 -6 -7
less prosperous future than their parents. This is the first time that has happened in generations and people can feel it in the air. It can cause them to do crazy things like riot. Or to do sensible things like pay off debt and save, both of which starve the economy as spending falls, but are certainly good things to do on a personal level. Until the government reverses the cuts and raises the money to invest in the country’s future we are going to be in a downward spiral. If George Osborne’s speech at the Tory party conference was anything to go by, he’s got no intention of budging. His sole focus seems to be the reduction of the debt level at the expense of everything and everyone else. He says you can’t borrow your way out of debt. I say you can’t cut your way to growth. Even David Cameron’s closing speech at the Tory party conference in early October outlined a gloomy future for the UK and recommended that families pay off debt asap. You’d have thought a PM’s speech to an easy crowd of his own party delegates would have had a more upbeat tone and be full of self-congratulatory soundbites. But no. Instead he telegraphed what seems like an inevitable downturn ahead. He couldn’t be expecting an economic collapse could he? Quite possibly. Batten down the hatches.
source: Office of National Statistics
What next?
“We built the global financial system on a foundation of debt, leverage and risk and now this house of cards that we have created is about to come tumbling down.” Michael Snyder, theeconomiccollapseblog.com
Trends 2011-12
coming to a town or newsreel near you... ¤ Growing US unrest. Occupy Wall Street is just the start. ¤ Growing EU unrest and more bailout controversy. Growing conflict between EU nations unable to agree on what to do about Greece.
¤ Growing calls for westerns leaders to resign: bankers, PMs, ministers, CEOs all taking heat. ¤ Lots of excuses from western governments about lack of economic growth, but no solutions. ¤ FEAR and PANIC in the air. An increase in interest in personal contigency planning. ¤ More riots in UK. ¤ An increase in home food gardens as food prices rise. ¤ Poor high street sales leading to shop closures after Christmas.
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¤ Greece going bust. Panic ensues.
¤ An conveyor belt of disappointing economic data leading to more of the above. ¤ An increase in people waffling on about December 2012 and the end of the world. The media will tag along for the ride. It will get to fever pitch by about November 2012 but we will still all be around to have a good laugh about it in 2013.
Small Mod Cons: because knowledge is power.
Top forgers recruited by Goverment. Leading policy-maker says “Throw enough shit at a wall, maybe someone will clear it up later”.
Fight the system, not each other; united we win, divided we fall.