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Wednesday, 20 June 2012

G 20

The newspapers today are saying Mrs. Merkel stands alone as she opposes any attempt to 'print money' to hand out as 'stimulus' packages to promote 'growth' in stalled economies. I think she's right. The concept of constant and never ending 'growth' in economies is how we got into this mess and it is probably the one thing we need to reconsider very carefully. It is predicated on the idea that populations must continue to grow and the 'buying power' of individuals will grow as well. That last premise is really the crunch point. Only the increasingly small group of upper income earners are really able to claim increasing proprotions of their income is 'dispoable.' For the rest, life continues as a battle between balancing our household needs against shrinking incomes and rsing prices.

Stimulus? Pumping more paper money into banks to fuel more 'credit' to people already struggling to pay existing debts is not a sensible option. Again, this is how we got into this mess. Besides, printing more money simply devalues the currency overall.

Who is proposing this? Interestingly, mostly countries already struggling to pay National Debts running into trillions. Its a word that is probably totally meaningless to the average voter. A 'trillion' is beyond even 'telephone number' quantities. The US alone has a National Debt of over US$1.5 trillion, and the UK has close to a trillion dollar debt itself. What's a 'trillion' anyway? OK, in my vocabulary it is one million, million. That's right, it's got twelve '0's' behind the first number. At an interest rate of 2% per annum, that means every tax payer is essentially just servicing the debt run up on the National Credit Card by the w*nk*rs in the government supposedly serving them. In the case of Greece and Spain, thanks to US based 'Credit Rating Agencies' desperately protecting the crumbling dollar value against 'new' currencies and stronger economies like the €urozone, have had their credit ratings reduced - which also pushed the interest payable on much lower debts up.

Greece is trying to service a debt with an interest rate of 4.5% and Spain has something similar. If the G 20 were really interested in 'stimulating' those economies they'd cut the interest rates on those debts and raise them for the richer economies. Mrs. Merkel is right, the only option is to cut spending to the minimum and reduce the burden of ever larger government bureaucracies which produce nothing, actually strangle growth and increase corrution as they grow.

Germany experienced hyper-inflation in the 1920s and 30s and will move heaven and earth never to go there again. Mrs Merkel is right, no one can put our economies at risk of inflation of that sort again. I have lived with massive inflation. Salary rises of 12% 'Cost of Living' increases, plus 7% (the maximum I could be awarded for good conduct and performance) didn't cover the actual rise in cost of living which ran, unofficially because of the way the government measured it, at closer to 25% than 12. I would support Mrs. Merkel all the way on preventing having to live with that again!

As I said above, the concept that economies can 'grow' year on year in perpetuity is false. All things have their limits, unless you live in a perfect world and a perfect universe. We don't. Printing more money unsupported by either 'production' or 'treasure' is probably the resort of desperate men who think only in terms of elections and have no understanding of the impact on people or economies. Governments do not 'generate' money. They use it, they take it from their populations and 'redistribute' it to themselves and their hangers-on (and supposedly to the 'have-nots' through 'welfare'), but they don't generate wealth or even produce anything that could be 'sold' at a profit. Yes, I do accept that some of their services are necessary and are not 'market driven' but far to much that governments of various flavours have taken upon themselves in the last century are far better delivered by anyone except a government department.

Key to this is that 'growth' in government is not 'growth' in an economy. In fact, I'm convinced it should be measured as a a brake on growth. Yes, there are people being paid salaries, and they are spending that on consumer goods, but they are NOT producing anything to be sold. They are paid by the taxpayers, out of money the said taxpayers could be using themselves. Plus, the 'goods' being consumed have to be bought from someone else - often involving importing them from somewhere quite remote. I read recently that almost 60% of the food consumed (and measured in the UK economic statistics as 'growth' in sales) is imported. OK, there probably isn't enough viable agricultural land in the UK to support the 60 million people living there, and they certainly would not have anything like the variety they get at the 'local' supermarket.

Demographics are against the pundits of economic growth in the majority of western democracies. Populations are growing only through immigration. The industrial base is all but gone in many, and increasingly the economy is focussed on 'sales' and consumption and the 'service industry.' As this seems to embrace everything from cleaning services to anything done by a civil servant it is hardly an 'industry' in the 'productive' sense. It stands to reason that sooner, rather than later, the money has to run out - unless you print more.

And that is most certainly NOT growth.

Mrs. Merkel is right. The fact that a majority of politicians are in favour of running the printing presses and spending money they neither have nor own, does not make her wrong.

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