27 Sept 2012
Citizens in Greece and Spain are once again taking to the streets. Across the whole of Europe, people are caught in the grip of recession. Unemployment is high and still increasing. The cost of living not just ‘squeezed’ on the people who still have jobs but also ripped away from those whose jobs disappear. The people of Europe are, quite rightly, angry.
The scenario is easy to understand. Governments are in too much debt and have to get out of it as quickly as possible - and the only way to get out of a debt crisis is to pay it whilst incurring as little interest as is practical.
But the people are the engines of that economy. Governments want consumers to consume, thereby stimulating the economy and bringing in more revenue. However, this is never going to happen while people fear for their jobs, if they still have one, and those without jobs are a drain on society instead of contributing.
Economic models like Keynes or even Hayek have no answers. Both viewed the economy as it was before the introduction of the credit card. If credit cards did not exist then people might have money to spend during times of a recession. The encouragement here would be to somehow entice people to take money out of their savings by offering bargains and deals on the high street that are just too good to turn down. But instead of having that sort of money to spend, people have maxed out the credit cards and, if they are sensible, will be concentrating on paying off their debt before there is a sudden hike in interest rates.
With the housing market all but collapsed because first-time-buyers don’t have enough money to lay out for a deposit, legal fees and stamp duty, those with aspirations of owning their first house are saving - not spending.
And finally, with pensions ripped apart and leaving millions facing poverty in old age, people will save money where possible for retirement.
The banks caused the economic problems by lending irresponsibly and taking risks with our money. Now they want our money to get them out of trouble. But even worse than that, the reason for trying to pay off debts so quickly is to avoid extortionate interest rates. And who decides those interest rates? Ultimately it goes back to the financial institutions and those people rich enough to lend money.
The economy cannot work on a one-way route. There has to be a time when more money comes into the wider economy than is going into the profit hoarders vault. Until this happens, the economy will be terminally ill and must ultimately collapse.
As has always been the case in my experience; if you are struggling to make ands meet and you need to borrow money, the banks put up the rate of interest. If you have millions in the bank they will offer you an interest rate of 5% compared with 10% if you have nothing. It doesn’t take a genius to work out that raising the interest rate make it more difficult to get out of debt. Greece’s dilemma is a prime example of what millions of poor and impoverished people have experienced for generations.
The debt crisis is being made worse by institutions working on a model that threatens to plunge the world into an economic slump. What we witness today is nowhere near as bad as it may yet become.
Attempts to stimulate economies across the world has included quantitative easing and an interest rate for savers close to zero. It would therefore seem only sensible and fair to reduce the debt interest rate, held by those who are making money out of other people’s misery, to a much lower percentage than is currently demanded. At least that way Governments can relax their severe austerity measures and give the people a chance to work their way back from this headlong spiral, even plummet, into destitution.
The unreasonable demands of debt payment forced on Germany in the 1920s sowed the seeds for war. In present day terms the money masters demand unreasonable debt payment and Governments have no choice but to pay it or face the humiliation of a loss in credit rating. The parallel should not be discounted.
Still recovering from World War II, the bank manager of the 1950s was known by his prudence and the way he expounded moderation and calculated risk. There is no bank manager like that today because banks are focused solely on profit. It is right that we should split the high street bank from the casino-style stock investment banks. But until that happens, all we can do is encourage people, who still haven’t realised that the credit bubble is about to burst, to become more moderate in their consumerism.
It is a stark realisation that banks and governments believe that people can only prosper if the economy does. But only a few people prosper while the rest of us languish in the dregs of left over crumbs of cash. Even in the world’s most prosperous times, the majority of people were able to benefit only by borrowing money they did not have. It was that sort of notion that led to all this debt. The sudden encouragement of the widespread use of credit cards were seen as a solution for the 1970s that escalated into a monster that we now have to kill. The 1970s attempt to boost the economy is now failing today. Simply put, we only delayed the problem by around 35 years.
So why are we suffering all this? Everyone is focused so intently on the ‘economy’ that they have forgotten what the economy is actually for. The people are just so much more important and yet it is the people who are being battered, ignored and disregarded. The government wants the people to spend money but then make it impossible for them to have access to disposable income. The ‘Occupy’ movement points out quite rightly that 1% of the people possesses 90% of the world’s money. THIS is why the economy does not work. More then 1% of the people have to have more than 10% of the money to make the economic engine run. You cannot make a car go further by sticking less and less fuel in it.
It is necessary for governments to refocus their attention towards the people first. The economy must serve the people - not the other way around. Already we are on a road that will take us into very dangerous water. If we simply allow the current ideas to continue, then we still have two years before we reach the bottom. And we should hold money institutions to account first for their greed and governments second for their complicity.
What we can do as individuals is quite simple. Stop using the credit card and pay back all debts. Do not borrow money. Do not buy anything but essential stuff.
Also, while we are at it, we should demand that essential services like gas and electricity is administered by a not-for-profit company. People should not have to die for profit or decide when it is cold between heating of eating. I am currently running a petition for the UK, however, if you have privately owned utility companies in your country you can always consider starting a petition for your domestic campaign. For the UK petition, if you agree to paying for necessities without paying profit to a shareholder, please go to https://secure.avaaz.org/en/petition/Make_utility_companies_Not_For_Profit/share/
It is a time to focus on what is important. The people among the 90% should prosper - not the economy and just its minority beneficiaries..