Thursday, 9 July 2015

Nasty Piece of Work

Let's not be fooled by the budget, and increasingly it seems few people are being fooled.

This is nasty stuff. It is an attack on the poor, the ill and the young. It's an attack on the principle of society and on social justice. He has done the Blair and Cameron thing too of newspeak, thus calls a part-compensatory minimum wage a living wage, which it is not.

I was disappointed by the mealy mouthed words early on by Chris Leslie, the Shadow Chancellor, and later on, fearing the worst from Liz Kendall, the right wing Labour leadership candidate, I was rather more pleasantly surprised. She called the so-called living wage a con, and Ok she can set out her own position.

Obama has cut the deficit in the US by a third. He did it not through austerity, but by supporting industry, by extending the dole, by giving finance to the states, and by using quantitative easing. It still leaves an economy where the poorest have jobs that won't allow a climbing out of poverty. All this about the one per cent is also about the absence of a ladder that at least existed (if a long one) during the industrial age.

When interest rates are near zero, quantitative easing is just the next thing to printing money. The inflationary effect of this is near zero. To have the money sit in the financial system, or to leak out into property, is pointless. It should at least be used for what the Japanese have done: build infrastructure and employ people on good wages. This improves productivity. Going into property means it is more attractive than industry, and industry/ business is relying on low wages and thus won't improve productivity.

The SNP, Plaid Cymru and especially the Greens have spoken with clarity about the budget. Labour needs to do the same: to enhance its economic analysis and make the case against this disaster. I still have no sympathy for the plight of the Liberal Democrats: after all, it was their wooden leg that allowed this lot to destroy them and exploit Scottish nationalism to produce itself a majority - a majority straight into trouble over this cack-handed manipulation of House of Commons' procedures in order to give English MPs a veto over English affairs, instead of having an English Parliament.

The world economy continues to be imbalanced. Within Europe, there is no regional policy that is adequate to counter the effects of the euro, whereas the United States has a more fluid workforce with its regional adjustments. Monetary policy alone will solve nothing. And in the world, the corrupt capitalism of China is coming home to roost in its slush money imbalance of financing others to take China's exports, with a forced low currency. What this shows is that, with quantitative easing, the economy has never actually recovered but capitalism remains in a sick bed.

Freezing benefits for four years - and after the bedroom tax and council tax at 20% - is cruel. It will only be all right if there is actual deflation. If there is deflation (and he has raised taxes and lowered spending to further deflate the economy) it could cause stagnation: the Chinese and Greeks together could lead to deflation. Communism died in 1991 and capitalism died in 2007 and no one seems to know what to do with it.

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