Nov 13 2009
Competing futures?
On Tuesday I have agreed to talk to a brain storming session on what might happen next to the UK and global economies. With no Parliament to go to, and the opportunity to hear some interesting people on the same subject, I decided to accept.
I am now planning my talk. The idea appears to be based on scenario planning. We all accept that single forecasts of the future are prone to error. Instead we set out a range of possible outcomes, and then try to ascribe a probability to each. Here are four to try for size.
Scenario One: “We all live happily ever after”. This is the best case of the authorities. In it the US and the UK are miraculously transformed into nations of savers and exporters, whilst the Chinese, Germans and Japanese develop a passion for consuming and importing. The US and UK withdraw their monetary stimulus in perfect time, leaving quantitative easing behind them and then putting up interest rates sufficiently to prevent inflation but not so high that they choke off recovery. The benign forces of globalisation and digital technology resume their reign. The world grows again in a sustainable way. No, that was not a pig flying. We could be living through an extreme version of a normal boom/bust/boom cycle.
Scenario Two:” One bubble more”. As investors pile into gold and index linked securities, this is a popular view. In it the monetary excess evident today in China and India as well as in the US and UK spills over from asset prices and commodities into shop prices and wages. We have another flurry of fun, before the whole edifice comes crashing down again when the authorities lurch back to tight money and puritan attitudes to debt and spending.
Yet broken western banks currently are not able to pass on the high powered money to private sector lenders. Private sector wages are under tight control on both sides of the Atlantic. The probability of this happening in short order seems low.
Scenario Three “The US and the UK are the new Japans”. There are still gloomsters about arguing that we are in for a long period of deflation. After 1990 Japan had an industry of broken banks. It took them years to sort them out. The government attempted money printing and huge fiscal deficits, but nothing made much difference to no growth or low growth. No amount of quantitative easing could lift the price level. Persistent zero interest rates failed to solve the banking and credit crunch. Could the US and the UK find the same happened to them? After all they have had a similar over extended property boom, a similar collapse in banking credit, and are now following similar monetary policies? I suspect not. The Anglo Saxons do not have the same ageing population and the same drive to save as the Japanese. They are better at inflation.
Scenario Four “Markets force adjustments”. The remorseless rise of Asia, led by China continues. The Anglo Saxon economies find there are limits to how much they print and borrow. They enter a period of painful adjustment, with higher interest rates than they would like as they seek to sell their debt. They grow more slowly than their old trends, and are forced to divert more money from private and public spending into exporting and debt service. The world grows, but at a slower pace than prior to 2007. There are occasional country crises, marked by currency and or banking collapses.
I would be interested to hear how you see the future. If you have a better scenario than one of these, then I will borrow it.
36 Responses to “Competing futures?”
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
How’s this? The UK and US continue to stagger under the weight of incompetent and corrupt government, the rest of the world see’s some slight recovery with various mini bubbles. The supply of oil becomes ever tighter (just look at the decline in production figures) meaning that economic activity has to become ever more localized and politicians look around for oil resources, i.e. war. We’re at the end of the oil age and nobody is planning for it. All the talk of recovery is idle when the net amount of energy available to mankind is declining.
If I may JR, scenario 2.5 ~ very serious inflation takes hold shattering Sterling as a credible currency and pauperising the country. Clarion voices advocate price and exchange controls in a tragi-farce re-run of the 1970’s and as international default beckons Mr Osborne trots off to the IMF via the ‘Healey express’ out of Heathrow.
I take the view that the seeds of the destruction of the next government are already sown. Tough luck for Mr Cameron but I fancy he won’t have the stomach for the medicine which might just avoid this and save him.
I wonder if Brown and Darling are doing this deliberately?
Scenario One – What Mr Brown would have us believe
Scenario Two – A more likely situation, if the powers that be are not reigned back by recent experience and a General Election
Scenario Three – Unlikely, as too many countries have been in the same boat at the same time. It’s more likely to happen here if the UK is tied too closely to Europe, and there will be less chance of economic differences creating dynamic differences.
Scenario Four – Perhaps it’s the turn for Asia to have the good times while we suffer enforced purgatory. However, we should be able to work through the situation more intellegenty than that.
Scenario Five “Learn to leave within your (long-term) means”. It’s what I’ve done, and why I’m rueing the lousy interest rates on my hard-won savings. Borrowing money is fine, as long as you can pay it back in a sensible time frame, and there is some safety margin the calculations in case something unforeseen happens.
Most sensible people learn how to do a variety of things (progress a career, raise children, maintain a house, manage money, keep a relationship going) and it’s a full life. As life moves on, the emphasis on each item changes. The national equivalent is to have a mix of industries in a range of fields, so that as one is declining, you can build up in another. Don’t hide problems (putting the unemployed on to sick pay – the equivalent of hiding the red bills from your spouse) but work towards solving them.
The practical problem is that learning relative austerity and responsibility is much more difficult than learning profligacy. Mr Brown has always been a one trick pony, and that was pulling the wool over economic eyes. Now we’ve learnt to move the wool, he has no plan B.
I would go for scenario four.
The fundamentals of the UK economy don’t add up. The debt is too big, the public sector is too big and paid too much and the banking sector is too big. Manufacturing and agriculture are too small. We don’t export enough and we import too much.
We have a culture in which 50% of the population goes to university and then expects to enjoy a well paid office job – particularly if they go into the public sector or taxpayer-funded work. Manufacturing and anything north of Watford has low status and is to be avoided. The fantasy of every middle class home-counties household is either that Jonathan will go into investment banking or work for a hedge fund and Harriet will become a city lawyer. The alternative is that Jonathan will join the BBC and earn more than the Prime Minister and Harriet will land a nice public sector job or be an executive in a Government-funded quango.
The oil is running out and there are big unanswered questions about our other energy supplies. We don’t save. We can’t control our borders. The EU tells us what to do over large areas of national life. Millions in the population are on benefit and we don’t really know how to get them back to work. Our currency has been significantly devalued and will go even lower. However, we will only benefit from devaluation if we export more and import less, but our manufacturing and agricultural base is not robust enough to take advantage of lost currency value.
The key question is who wins the next election. If it is Labour or a Labour Lib/Dem coalition then my advice is to cash in everything and either put it in the mattress, in gold or in a foreign bank deposit account and sit things out until the IMF arrives. If the Conservatives win, watch the left-liberal media turn on them and try to trash the new government to destruction.
Whatever happens the next few years are not going to be much fun. But there you go. If you vote in a Labour government for 13 years you get what you deserve. The public will just have to face the consequences of its actions. Some of them will be distinctly unpleasant.
A difficult call between being pessimistic about our outlook , really pessimistic , or utterly depressed.
Looking at the basic facts or our situation, massive private debt, massive public debt, a massive trade deficit, most of our industrial base flogged off, and a very loose money supply. So yes I see the potential of another bubble occurring, but this time we won’t be able to live with the demand coming from likes of China for resources, neither as a result of the debt we have will we be able to create the pretence of growth by churning debt. So it looks to me as if we will be confronted with a future of stag-flationary rot.
JR; we fired up the “Deep Thought” (DT) computer this morning to try and get the ultimate answer. You will be aware that the ultimate answer, cannot exist at the same time as the ultimate question of life, the universe and everything. We have consulted Mr D Adams’ Trilogy in Four Parts” and posed your four scenarios to Deep Thought.
We were not surprised to find that DT came up with Scenario 4 (four); but, DT would like to know what the actual question is. There is a chance that DT actually came up with the same answer as last time, namely 42 (forty two), but the ink ran out in the printer when it got to the “2″ character.
We are forced to assume from the above that “macro-economists” are only capable of giving answers to unknown questions. The system is linear and reversible though. When the question is known to macro-economists, they are not capable of giving an answer.
No, I have not lost the plot. A weired thing is happening in the galaxy. People are turning to Hitchhikers Guide for answers; and, they are looking for the one genius who knows the ultimate answer to our problems. (The one-strong-man scenario.)
And; people want to know why that guy is not in charge.
Take for example on BOM:-
http://burningourmoney.blogspot.com/2009/11/time-for-not-having-much-of-choice.html
Also from Dan Carlin, (pod-cast 163; Blocking the Playmakers), asking the same question:-
http://www.dancarlin.com/disp.php/cs
Back on this page, our host, Mr John Redwood MP, is sitting at best, one row too far back on the green benches. Why the hell does he bother? There are lots of things he could be running that would have much greater “value added” for our nickered nation than what he is doing now. Why isn’t he in charge? (Dan Carlin (above link) suggest an answer to this question.
PS. To Alan Jutson. Great post yesterday. I attended a top level think tank yesterday; one that gave up to the minute state of small businesses in our area. It was run by a local lady. She runs the mobile burger bar parked in our local Builders Merchants yard. She knows every bricky; spark; plumber; chippy and ground-worker in the area, mostly self employed. I am pleased to say she reports the lads are hanging in there. Prices are tight but they are not short of work. In fact the “bookings to bills” ratio has started improving.
Scenario 5 – That scientific & technological development continues at the present rate or increasing – that we see space industrialisation, nuclear electricity, oil production from algae, GM food more widely available, nanotechnology expanding to a $3.1 trillion industry by 2015 http://alfin2100.blogspot.com/2009/11/nanotech-to-grow-from-147-billion-to-31.html#links
Moore’s law continuing to work & almost certainly some unforeseen technologies too. This means world growth contimues at an increased pace & the entire world gets rich.
The subsets to that are that (A) Britain/EU/USA allow this to function & get rich or (B) they (or some of them) continue to criminalise use of new technology, as Imperial China criminalised ownership to 2 masted ships & become an economic backwater.
I think scenario 5 is likely since it is just continuation of current trends & regret to say scenario B is too because it is also continuing the trend.
Our current scenario is: Reinflate the bubble. This is Gordon Brown trying to get lending ‘back to normal’ (i.e. in excess) aided and abetted by his partner in crime – Mervyn Allister King. This involves a bit of scenario two, as people pile into Gold (and we have ‘Cash for Gold’ TV adverts). Is this a bubble in the precious metal? No, because its rational behviour in the face of money printing. I personally wouldn’t buy Gold right now, but I expect it to go higher, possibly much higher. So too, I would expect Silver, Palldium, Cotton and other Agricultural commodities. Which leaves us with a mix of scenario three or four. Probably four, the UK is I suspect pretty good at generating inflation.
I fear scenario 4 is the most probable. Not only that, but I forsee the death of paper money in the rise of more inflation-proof credits and vouchers for goods and services. ANd yet, this would in no way be the death of capitalism, merely an adjustment.
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I think that scenario 4 is the one that the global economy should take and may be forced to take once it realises the other three are too costly or unrealistic. I think the global economy needs to be prepared to let banks with poor business models fail and we must be happy to live with that concept. From an ecomonic point of view the western economies are going to constantly find themselves undercut by China and India as our costs of production are much high (along with red tape and social provision). That point worries me about the “leave it to market forces” however I think it it inevitable that standards of living will start to equate. The western economies will probably fall and the others will rise. Its how we manage that adjustment as no politician is going to be able to sell that concept unless they can blame others. Thankfully the change may be over a long period of time, like the slow enrichment since the Second World War.
Too difficult a task to predict all but I will add a couple of elements:-
Nations with strong agricultural surplus will experience a long term boom in prices as demand from the new economies increases. USA will be main beneficiary.Ukraine & Russia if they can sort out land ownership issues. Argentina & Brazil might benefit. African economies to worsen.
Internal Chinese problems will slow them significantly. Leadership too frightened to revalue in case resultant price inflation leads to internal security issues. India will overtake China as the main new exporting superpower by 2030. China also has aging problems.
The EU will collapse as a political entity under the weight and expense of itself. A Franco German security pact will emerge and a broader customs union may survive (wishful thinking perhaps!!)
A Scary prospect. Russia will go to war with one of the Stan’s. Iran and Turkey will combine to defeat Russia and establish themselves again as the major powers in Western Asia. Between them they will control the secure supplies of oil from central Asia. A new generation of Germans with no recollection of 1945 will look to their lost Eastern territories in the light of Russian weakness.
A weakness with all your alternatives John is that they all assume peace – a desirable situation but perhaps not a likely one.
The USA’s recovery will be stong and relative to UK and Europe they will be stonger by 2020 and still world dominant in 2050.
Your four alternative scenarios probably cover, between them, what might happen to the global economy.
Scenarios for the UK economy are a different matter. It will depend most significantly on the result of the general election. It seems to me there are four possibilities:
(1) Labour form a coalition government with the LibDems;
(2) there is a hung Parliament:
(3) Conservatives win with a very narrow majority;
(4) Conservatives win with a comfortable majority.
In the event of (1) or (2) there will be a reluctance to confront the issues; the UK credit rating is lowered; there is a major financial and funding crisis; there is a strong chance of IMF intervention. Business and consumer confidence will be hammered; the recession will be renewed and prolonged.
In the event of (3) the Conservatives will be cautious, risking a UK credit derating; they will then call an early general election to seek a stronger mandate. In the meantime business and consumer confidence will remain low; there will be no sustained recovery of the UK economy.
In the event of (4) the Conservatives will begin the painful task of cutting back state spending and incentivising business and work with lower direct taxes (on business and personal earnings) and higher indirect taxes (eg VAT). If done boldly and decisively, it would have the potential to spark a bounce back for the non-state sector of the economy.
John,
I just watched this video and found it more than a little alarming! Perhaps you know Lord Monckton and the veracity of his credentials? I strongly urge you to watch this (even at 90 minutes) as if true,you will most likely be talking about it on Tuesday!
http://www.youtube.com/watch?v=4zOXmJ4jd-8
Reply: Chris Monckton worked in the Thatcher Policy Unit when I ran it, so I know him well.
Couldn’t really beat your possibilities for detail,
But I think we are in for a long period of very low growth in the western hemisphere, with unemployment remaining at high levels because the the glacial pace of the recovery.
In the UK, well it all depends upon who wins the election, the recovery will even more precarious, there is no further movement possible on interest rates and the printing of money.
I think that the £ is not slipping further only because the markets believe that a conservative government will take office within 6 months and reduce public spending. Just think what state we would have been in had we joined the euro!
If Mr brown did one good thing it was dropping the anchor to keep us out of this.
QE and the low value of the £ will induce inflation into the system and interest rates will rise late in 2010
The poor pensioners, many surviving on a fixed income, have been hit hard by the low rates; they will then have their capital eroded by inflation.
Scenario 4 looks spot on to me, except for the UK.
For the UK: Rising inflation. Stagnant growth. Sterling collapse. UK credit rating downgraded. UK forced to choose between national bankruptcy and joining the Euro, and chooses the Euro. UK joins the Euro at 1 Euro = 1 pound, thus avoiding most of the immediate pain of the switch-over.
Sad, but I fear the most likely.
The Global balance is dominated by the power of Capital (and earning power) in China, the energy resources of the Middle East, burgeoning Islam religion and the prospect of a Western lifestyle for all the downtrodden. Any scenario addressed to UK economy must address these forces and how the UK relates to future movements in the global balance. China is not a democracy and will have difficulty evolving towards a successful Western lifestyle, likewise Russia and India, most certainly not Pakistan. Brazil as an upcoming power is more in tune. A major war is always a possibility, you don’t mention it in your four scenarios.
The scenarios are very finance centric as you would expect
you need to layer on top
what can a first world high tax economy do to earn its way in the world when competing with Asia churning out graduates by the million?
what will happen when Asia has acquired the skills which have kept us in the dominant position?
what can uneducated people do in a first world country?
i think who has the intellectual property will become ever more important, and our current approach of giving it away to Asia in the name of cost cutting will kill us long term
and then we end up as the 3rd world country…
Easy to moan.
In a way, the whole world is like a large Europe. As one great power grows, red giants, and then declines – often quite suddenly – into a black hole, there is always another little, unnoticed power there in the background in an earlier stage of development.
China could be that power. Or Something Muslim? What about South America, quite apart from Brasil? Is Russia that out of the question?
I have lived in Africa and can say that, while Africans have a nasty side, when they get it right, they are unstoppable. South Africa? Congo?
Some people despised USA in 1939 after the Great Depression. How wrong the Japs were!
Me, I believe in Anglo civilization. If we go under – as we seem to be (birth rate, immigration,general despising of “white males”) – then, God help the world!
One thing I am, however sure about: Europe is a non starter. It is going to make just one terrible mistake. Then it is “Civil War”.
re “very serious inflation takes hold shattering Sterling as a credible currency and pauperising the country” hasnt the bank of england moved its own pension fund into inflation linked bonds? says it all really
I can’t even hazard a guess at what will become of the UK’s economy. European (first world) economies have collapsed before and came back just as strong but the world is a very different place now than we have ever seen before. We now have no manufacturing base to speak of, export nothing indspensible to other nations (our strongest sector was financial but that has now collapsed), don’t seem to be a world leader in anything that I can see.
On the other hand the UK’s economy is still one of the biggest in the world and it is unthinkable that it could collapse like Russia’s did at the start of the 1990’s following the demise of the Warsaw Pact bloc (Russia does have the advantage over us of having massive reserves of natural resources, unfortunately our Golden Goose has already laid it’s egg and the North Sea Oil & Gas sector’s growth area is now exporting our skills and expertise to less developed areas of the world e.g. West Africa, deep water operations off Brazil)
As poster above said I think we may be forced to join the Euro. Under Labour this would have been a given but if David Cameron becomes the next PM and introduces his new legislation promising us a referendum on major decisions in Europe will the British public vote for it? And will the Conservative Party and it’s grass roots be happy to throw it’s weight behind such a policy? Bearing in mind that such an introduction will have to take place before any substantial collapse in Sterling or we really will be beggared.
An interesting few years ahead methinks.
All the four scenarios (except possibly the Shangrila Valley-like number one) seem to assume the crisis economics can be indefinitely continued without real-world realities eventually intruding.
I believe the Great Depression was not cured by WWII and re-armament but rather through the conjuring trick of off-balance sheet social housing provision via Fanny Mae and Freddie Mac with their later sophisticated cousins and imitators.
We are entering the later stages of this same depression. While WWII provided an early distraction from the economic mess it has now returned to haunt us with a vengeance.
We can expect similar real world intrusions in the near future. These will impact the USA and Britain the hardest initially but the consequences will most likely have the main initial eye-catching results in the break-up of the EU.
Sound money will be restored when trust in elected leaders again becomes the norm, until then, all is illusion I fear!
Scenario 2 is the most likely, the ultra loose monetary policy will lead to asset price inflation which will quickly feed through to general prices. No such thing as an output gap, sellers will always sell at a maximum price not expand volume. We will have a quick period of growth quickly followed by inflation. After the next crash they will have nothing left to fight it with and the Tory Govt will be out of power for a generation.
The UK limps on, unemployment rises steadily but growth is recorded for Q4 after the holiday season. April 2010 and Darling announces a budget of unaffordable giveaways for ‘hardworking families’ that actually amount to a pre-election bribe for benefit dependants that never work.
May 2010, the tories win a hard fought election with a majoirty of just over 50 seats and quickly announce an emergency budget in an attempt to prevent a debt-compound trap developing. The initial cuts in expenditure tip the fragile UK economy back into recession to howls of anger from labour and the labour-friendly media.
Unions and other grass-roots left-wing organisations begin to forment civil unrest as unemployment hits 3.5 million. The tories try to explain the problem but can’t get past labour spin and media soundbite, their approval rating plummets.
RBS and Lloyds, trying to meet EU dictats to shrink their balance sheet flog off all their good assets leaving the taxpayer left standing with loads of leveraged rubbish. The tories have no option other than to print more money or let RBS go under, they choose the former.
By 2012, the UK returns to growth but unemployment remains very high, the zombie banks remain zombie banks and the UK slips down the world league tables. Sterling remains weak. The BBC spend half the year banging on about how the tories cut funding for athletes and wheeling out celebrity tory bashers.
The UK is steered away from doing a Japan by a tory government but it is very very painful and labour manage to convince half the country everything was alright before the tories took over.
The tories go to the people in 2014 and lose to Gordon Brown who decided he did not want to go after the 2010 election, and he starts wrecking everything again.
Well I know this may be something of a heresy but I think we are about to see an upturn in our economy. Of course unemployment will lag long behind, who knows Lisbon might even be good for us. We might even join the Euro. I wanted an Empire well seems we might have one. Grief what has come over me, maybe I’m just over tied or more likely it’s the red wine. In either case I am feeling optimistic tonight so nobody burst my bubble till the morning.
Reply: I think there is a modest recovery underway, as you would expect given the recovery elsewhere in the world and the huge monetary stimulus that has been administered.
Its probably safe to post me without worrying to much, seems “Its” passed over for now, I’ll make it plain if I am feeling uncertain about my writing when it happens again. Many thanks Ross.
I don’t think I could support the Third scenario, “The new Japan”.
I feel that the problem there was as much cultural as the financial situation. Most people had “jobs for life” and there was (and still is) the fear of “loosing face” or causing anyone else “to loose face” which stopped people from arguing for change.
This attitude is certainly unlikely to prevail in America where more people have the “get up and go” attitude, and generally don’t have the belief that it is up to the State to support them. Here, unfortunately, attitudes are different, with so many people believing that the State owes them a living. We will probably be pulled out of the recession on America’s coat tails, provided the next government is prepared to make some real effort to reduce the country’s debt and avoid its credit rating being downgraded.
I certainly can’t believe in scenario one, effectively “if you ignore it, it’ll go away”!
A cross between two and four. A Conservative government tackles the fiscal deficit with a vengance, cutting deeply into public expenditure and raising VAT to 20% temporarily. QE and 0.5% interest rates are maintained for 18 months so that the housing price bubble is re-inflated and Lloyds/HBOS and RBS are split up and sold. Easy money is then ended and the second dip of the double dip recession is massive, taking unemployment to 4 million at its peak. The full horror of the fraud perpetrated by the Labour government and the Govenor of the Bank of England is realised and (protests -ed) are formed to march on Labour HQ and Threadneedle Street; ……..
The economy slowly recovers when the Conservative government declares that in future no bank will be bailed out in any circumstances, and implements the policy “Taxes should be low and everybody should pay them”.
In the meantime, Lord West has told us that the 2012 security issues for the Olympics are our biggest challenge of this kind since WW2. All the propaganda we have had on the Games has made no mention of this up until now. It is not that the problems have not been known. See my post on Tuesday 12 May on this subject.
Over the last ten years the UK has been awash with funny money. Most prominently money borrowed from countries such as China and the middle east.
Following the sub prime crisis in the US this money is now wanted back by these countries as they regard it as risky.
The government cannot stop this but they can affect the timing because if they guarantee this money then it will not be regarded as at risk.
This funny money has resulted in overpriced assets.
It will take approx. 3 years to deflate these assets and for the economy to rebalance itself.
During this time only prudent well run businesses will survive.
At the same time the government which has received an abnormal amount of tax as a result of this funny money and has spent even more and this will have to be rebalanced by increasing taxes and cutting spending.
Hopefully this will be done in a transparent and accountable way by raising the basic rate of income tax but I think this is when we will see if David Cameron is a man of substance or is as committed to spin as New Labour.
Conservative Government with strong majority.
Radical “growth” ageneda based on massive simplification of taxes.
Corporation tax reduced to 10%. VAT at 5% on construction, plant & machinery and energy efficiency products, 20% on all else. End of all other capital allowances.
Capital gains taxed at business or individual rate with simple, 5 year taper to 0%.
Single flat rate income tax of 27.5% above a £10,000pa tax allowance.
National Insurance “hypothecated” to health insurance (12%) pension contributions (6%) unemployment protection (3%) and a run out fund for existing liabilities (3%).
“Vouchers” for all education from 3-23, scrapping huge swathe of quangocracy. All schools, colleges and university liberated to charge market fees.
Radical shift to needs-assessed, means-tested, “personal” welfare – CSJ style. Lower welfare bills as a result of improved incentives to take work.
Government accounts return to surplus in 2014-15. State spending as %ge of GDP falls to 40% by 2020 and to 30% by 2025. UK growth rate steady at 4-5% per annum average.
I think an over-riding theme for the UK on a European level will be that as we become perceptibly less solvent than the Franco-German axis, we will be subsumed into their sphere of influence on a subordinate level to them. In other words there will be a tacit quid-pro-quo that in return for them keeping us out of the workhouse, we will join the Euro, accept Franco-German inspired legislation and so on.
I see this as happening even under a centre-right Cameron administration. I won’t take your not mentioning this in your speech as meaning that you don’t think it will happen!
Thought long and hard about this, as much depends upon the result of I believe two General Elections at least.
The reason I do not think that Conservatives winning one General Election will make much difference, is that it will take five years just to steady the ship to prepare and be ready for real action in the second term.
Why no real action in the first term SOCIAL UNREST.
To make any real difference the whole Social Experiment of High Tax, Benefits and Tax Credits for many, needs to be scaled back on a massive scale. This Social experiment has failed here, just as Communism did in many other Countries, some decades ago. There is simply not enough Money being generated by sustainable business means, to cover the spending.
If DC cuts back too hard too quickly on Benefits and Public spending, then I beleive you may have Poll Tax type riots in the streets. For that reason I believe he will try and steer a narrow course with small reductions in chosen areas.
On tax there will be slight reductions for those who work, to encourage those who do work, to continue, but nothing significant will cahnge as the Country cannot afford it.
In short the first term of 5 years is all about attempting to create some sort of stability, upon which to build the next 5 years where change can really happen. With much lower tax rates and a reduced range of Benefits which needs to go back to its roots of a SAFETY NET, not a way of living
If the above happens, then think proposition 4 is most likely. Yes I know its grim but we are in very grim times. I have tried to think about how the population will react and relate it to a period in past history, and that is difficult, but probably as during the Second World War and the early 1950’s.
People will become more self sufficiant, more inventive in making ends meet, with the black market flourishing, and barter arrangements or trade offs being made on a larger and larger scale. In fact more like the population behave in third World Countries.
If Labour ever get in again, then I think anyone under 40 should seriously look at emigrating. They have had 4 periods at running the Country in the last 60 years, and on each occassion they have had us go very nearly Bankrupt.
I could go on, and on, but will leave it here.
Scenario 5 the Gooseberry.
Earlier this year I took note of the rise in the G20 to be of particular interest.
Not so log ago retailing on the high street had clear defined borders. A couple of department stores perhaps one at each end of the high street. Smaller shops between. The internet took off and now we could be shopping in Brazil, US, India or Turkey.
Brazil is aligning itself with China, similar ideas on monetary policy. China is also building interest in Sudan. Borders are becoming defined by consensus more than neighboring lands.
The EU is taking the old approach and ignores this shift. It is after a land grab which is expensive and troublesome. Forever like a hung parliament unless it removes democracy.
The G20 saw me seeing partnerships on consensus between certain nations ignoring geographical positions.
The EU will be outplayed. Europe’s Crown Jewels are its niche markets, the best cars, art, glass, fashion, music, sport, financials etc. Homogenisation of this could see countries leave to form partnerships elsewhere in the globe or go down with the ship.
Partnerships that include the third world for cheaper goods, consumer countries providing finished goods and markets, a banking country with the reserves and a country with financial markets.
Hard to see this from our perspective now in the EU. However, with the rest of the world embarking on this as I believe it will Europe could be the gooseberry.
Scenario 4 I think is a good bet punctuated by governemnts being pressured to give its people a boom.
John Moss ~ not bad, not bad at all. We can only hope Mr Cameron has your foresight and courage.
It was telling whith Darling and Tim Geitner putting their proposals forward. Neither backed reserves and deposits. That I found worrying. Both want to keep high debt and I believe both propose taxpayer bailout just in different ways.