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We’re all (quite possibly) doomed
Wary of sparking panic, politicians are neglecting to acknowledge the true scale of the catastrophe that may await us, says David Cox
There is something oddly muted about current discussion of our economic difficulties. The Government fears we may have to wait until the second half of the year for an upturn. The Opposition warns that counter-recessionary measures may mean higher taxes in future. We should be so lucky.
Doubtless those in charge of our destiny are wary of sparking panic. Hence their reassurances that whatever we face, it won't be anything like the 1930s. On this, at least, they're right. Things could be far worse.
Today, a frozen credit market and impending deflationary spiral are combined with unprecedented global imbalances. The predicament this creates will not be dissolved by fiscal stimuli, debt guarantees and quantitative easing. Such measures may however make things worse.
The US cannot run a deficit big enough to keep its people in work. Attempting to do this will doubtless prompt increasingly impoverished but ever more indebted Americans to demand protectionism. This seems likely to prompt competitive devaluation and the disintegration of the global economic system.
In a worst-case scenario, strikes, riots and looting could all occur – forcing the Government to impose martial law
In such a world, Britain's debt will leave our country particularly disadvantaged, as sterling's slide is already indicating. UK bonds are likely to become unsaleable long before their American equivalents. If our public finances collapse, the IMF is unlikely to be in any position to rescue us.
The Government may find itself obliged to default on pensions and benefits, ravage public services and resort to hyperinflation to dissipate its liabilities. This could make the middle classes as disaffected as the workless.
Our society is no longer cohesive enough to accept whatever share-out of pain authority dictates. Strikes, riots and looting could all occur. Martial law may be required, as Britain loses, perhaps for ever, its standing as a serious world player.
It might never happen. However, any serious approach to our present difficulties must acknowledge that it might. ·
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Comments
Can the media please stop with the doom mongering.
We'd all be better served if you get back to a balanced, and more broad spectrum reporting. There are other things going on the world that aren't hell and high water. The BBC in particular can't resist a story where they can wrap a mind boggling statistic
around a tragic story...10 points for un-born baby drama & suffering of elderly, 9 points for abused/starving children 8 points for middle-class hard luck drama , 8 points for environmental woes... Excuse me, but I don't want to be bummed & numbed by numbers every time I watch the news.
It certainly could happen, social control is ever tenuous, and the way practically everyone is in denial over the recession - it could be over in six months etc. - means there's little or no preparation for a prolonged and painful slump. But then anyone under forty has had no experience of anything but boom and more boom, so no reason why they should have any experience of anything different. But the bubble had to burst, and a lot of people are losing out big time.
I think we have already thrashed this out on John Redwood's blog, actually. Yes, Zimbabwe is possible. But I am keeping my money in nationwide where I expect it to lose some of its value, but not turn into bits of useless paper. The trouble is that the West isn't working, but is rich; the East is working very well and is poor. Sloshing around of capital is, therefore, likely.
Mr Cox must have a very low opinion of his fellow human beings. The current media trend for pointless nay-saying is getting pretty boring now.