It’s all about the deficit

This was going to be a quick post after the budget except that I then spent ages trying to find some statistics and had to give up!

The big thing George Osborne had to say (apart from a few gimmicky changes to pull in the voters in a few weeks time) was that he was “reducing the deficit.”

But what does this mean?

I remember taking out a mortgage and seeing it shrink. But not because I was paying any of it back – it was an interest only mortgage so I owed as much money at the end as when I took it out. But it did not feel like I owed as much. Why? Because I had just started work and my salary was increasing each year and the value of the house was on the way up. So every way I looked at it, my mortgage was smaller – it was a smaller proportion of the value of the house than when I took it out and it was a smaller proportion of my salary.

And this is what George means when he says he has got debt falling. His statistics are

George's budget debt percent“debt as a share of GDP falls from 80.4% in 2014-15; to 80.2% in the year 2015-16. And it keeps falling to 79.8% in 2016-17; then down to 77.8% the following year, to 74.8% in 2018-19 before it reaches 71.6% in 2019-20.”

But he is actually going to borrow more money.

The forecast amounts we will BORROW over the next few years are:

George's budget real debt

(source Red Book Table 1.3 or 1.4)

But he has not actually paid off any of the debt. (Yes he did talk about paying back some old debts

“I can tell the House that we will increase the number of long-dated gilts that we sell. We’ll also redeem the last remaining undated British Government bonds in circulation. We’ll have paid off the debts incurred in the South Sea Bubble, the First World War, the debt issued by Henry Pelham, George Goschen and William Gladstone”

But he has done this by remortgaging {see Red Book Table B.1 which shows borrowing through gilt sales around twice the level of repayments through gilt redemptions}. It is like paying off Barclays by going to HSBC.)

I would like to compare the amount this government has borrowed with its predecessor, but could not access the data to show that he has borrowed as much as the previous government if one excludes banking crisis debt (which is what all the quoted government statistics appear to do).

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So much for ‘expansionary austerity’ solutions

It all went pear-shaped in 2008 but it is getting better now. Except the graphs tell a different story – but hey who cares about the facts…..

LARS P. SYLL

Unemployment rates in Europe, Japan and US
Unemployment_rates_EU-28_EA-18_US_and_Japan_seasonally_adjusted_January_2000_January_2015

Source: Eurostat

If this is recovery for Europe, well, I’ll be dipped! Some years ago unemployment rates at these levels were considered totally unacceptable. And then came the Reagan-Thatcher turnover and price stability was everything and being unemployed was something people freely chose to be …

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What do we need

Training as an accountant involved acquiring lots of useless information – like understanding how little wire coils stored information in big computing machines (at a time when the first desktop PCs were already available).

Maslows Hierarchy Of NeedsOne thing that has stuck with me and which does appear to be useful, even if I failed to appreciate and use it to motivate people was Maslow’s hierarchy of needs, which looks like this (with thanks to Wikipedia for the image)

Apparently Maslow never drew a pyramid, but this is the way we usually look at the hierarchy – with basic physiological needs (air, food, water, clothing and shelter) at the bottom.  Once these are satisfied we can look at other needs such as “safety” which include personal safety, financial security, health and protection from accidents and illness.

After that we want to be loved and belong and then be valued and respected for who we are and with all this is in place we can realise our full potential.

Of course not everyone agreed with Maslow – he may be wrong in placing some needs “above” others and he only reflects the people he studied and not people in different sorts of groups where, for example, society needs may be more important than individual needs.

But what interests me is that money – finance – is regarded as quite a low-level need.  We need financial security.  But what I struggle to understand is the capitalist need to measure everything in terms of money and the desire to accumulate vast amounts of monetary wealth.

Perhaps some people try to show they have realised their full potential by their wealth, but I would be surprised if that is true for everyone when you could potentially be

  • the best possible parent
  • the person who discovered…
  • the fastest man on earth
  • the best tennis player
  • a published author
  • ……

So why do we concentrate on wealth so much when we measure our economies?