Economics · Mind The Gap!

Deeper In Debt.

Britain has a healthy economy, and it has a healthy economy because the economic figures are healthy. It’s how Britain – and the British – do business. We all do it, we all look to the paperwork: we all look to the figures at some point in the reckoning. Even when buying a bar of chocolate there’s the evaluation of quality over price; and that goes for Aldi too, who have various kinds of chocolate for the unwilling spender.

Britain, however, is a very different place than Europe. It’s as if there’s a real divide between the European economies and Britain in as real a way as there are twenty miles of seawater between them. There are few enough Europeans who understand the British mind – and an economy is the result of a cultural mindset. The British, for all their intelligence, are stumped when it comes to European minds and the economies they create. And the Americans are even worse because they’re so deluded as to think what’s right for them is right for everybody.

The Germans are more sensible: they live next to the French who somehow manage to exist in a way that is incomprehensible to the mind that created German formalities. At least they are aware of the fact: the British are not. Indeed, one Cambridge educated friend of mine said that since we’re Anglo-Saxons, we share the same culture as the Saxons. That is to say, the Germans. What he was ignorant of – and there is no other word for it – is that for all their being German, the Niedersachsens and Sachsens are very different from each other.

So what has all this to do with debt? I assure you, a very great deal. Because indebtedness is as much an expression of the British cultural mind as cuisine is to the French. It all has to do with ‘punching above one’s weight’ as the British say: the British like to be more than they are, as it were. They aren’t satisfied with what they have as a household or as a nation in the way the Germans are. There’s a lot more to “Deutschland Über Alles” than the expansionism, the only thing the British mind is capable of seeing: the Germans put their country first in a way that baffles the British. I happen to understand both mindsets, so am in a position to clarify the issue.

As a side note, when I worked four days a week in Germany, I had enough to live on. It wouldn’t have supported a family, but there wasn’t one to support back then, and if there were, my career would have stepped up a grade by that point. Add to which food and rents were (and still are) affordable. In Britain it was a very different story: I don’t think there was a month where we could honestly say we had enough money coming in.

No wonder the British work six days a week to earn what a German earns in four. And the German worker gets twice the holidays to boot. The British answer to this is to relax the lending laws. It’s how the Americans kept their banks afloat in the 90s and 2000s. Until the point came where the ponzi scheme unravelled and they didn’t have enough coming in to pay their way. That was when they tore up their half of the contract – this wasn’t a banking crash as such, that was just the initial stage of the depression – that happened when the American banks broke their word. But that’s Americans for you: they’ll happily put their name to a contract when the going is good, and they’ll renege on it when it no longer suits them to do so. Reminds me of something the poet Robert Frost said about umbrellas…

Slack Regulations And Crashes.

The British have slack lending regulations and slacker banking regulations, both of which lead directly to crashes of the economic kind. It is a point of note that the recent crashes from the 1890s onwards have all stemmed from countries that had poor fiscal regulation. Their effects were felt elsewhere, however, and led to the German economic crisis of the early 30s just as it did the worldwide depression of the last few years.

In Britain today, the slack lending regulations mean that it’s easier to survive on a poor wage than it would be with tight regulations. Borrowing at the end of the month from a loan shark means that workers can work for less money and still have a roof over their heads. It’s not good business, but if you’re in Britain, there’s little else by way of business these days – the good stuff has either been bankrupted by technologies emanating out of Japan and the bad stuff has been offshored to the Philippines and China. Either way, there aren’t many jobs in Britain and those there are aren’t very good.

Lean and mean is not the way to do business: the poor in pocket demand lower prices, and to even afford them, need a loan. They do need a motorcar because their work is twenty miles off and the bus service was suspended in the 1980s and the railway track taken up in the late sixties. Either you support the corporations peddling petrol or you’re out of work. Not that selling petrol makes much money, and that goes for Europe too. But that’s for another post, when I have the time.

Only there’s one of those invisible threads running through this post that hasn’t even been alluded to, and it is the effect on the government. Taxes from major industries and other institutions are, what with the lack of regulation, in this case, the ability to offshore a business’s tax affairs, are easy to avoid. When these same businesses are saving money by paying their workers less and nibbling away at their terms and conditions, is it any surprise that they in their turn are paying less in tax? The sales tax goes down too… it’s a negative spiral. And the British government’s answer is to spend less themselves (1). Government workers who once had a cushy job are now employed by a rapacious corporation and find themselves squeezed.

Easy Money.

The easy answer to all this is to borrow a little money. The British family maxes out the credit card to get over the last week of the month and pay some of it back on payday. The British government borrows from the Bank of England (BoE) and pays some of it back when the taxes roll in. Whatever else, the money paid in interest does not find its way back to the person who paid it. The Bank of England keeps that money that it is paid by the Treasury and it matters not a jot who owns the BoE, that money stays in its coffers and never comes back.

Neither of these debts are what are termed ‘secure’ – a secure debt is where there is a tangible asset to back the debt against. Britain has problems in this department too, because car debt assumes the car is worth the money it was purchased for, when we all know that a car loses 30% of its value the moment it’s driven off the forecourt.

The value of a house assumes the state it is in, not so in America and the issues that led to the last financial crash, but that’s America. In Britain it’s more subtle. The British house owner is so pushed for cash that maintenance is usually a matter of ‘next year’ – either that or they borrow the money for a new and hugely overpriced kitchen.

And so the game goes on.

Debt In Europe.

It’s true that these things do happen in Europe. People do borrow money to buy a new car and they do have mortgages. Only somehow, they have the money to pay for these homes and still have enough to maintain them. Making them prettier – my job at the time – was less of a concern and the market for that collapsed. Even so, the levels of indebtedness in Europe are very small compared to Britain.

None of my friends has a credit card. I only use mine to buy on the German Amazon site (because I don’t have a German bank account) and it’s the same story when buying a train ticket on the German railways website. And here I do not face the usual problems for the ex-pat, in that I do understand the legalese that these websites are usually written in. I know of Britons who on trying to buy tickets for trains in the country they live in and find it all but impossible. It’s something to do with the way Brits think… it’s all to do with living like a Brit in a culture that isn’t British.

There’s Never Enough Money!

Oh, and yes, none of my Dutch friends is ever paid enough. Well, apart from Hendrik. He lives like a church mouse, and has the outgoings of one. Those who have an imagination usually want more, and therefore they say they never have enough money. It has to be understood that they are able to pay their last week’s outgoings, though. There is no need for loan sharks or credit card companies to exploit the situation in the latest get-rich-quick scheme where the owners are rich and the guys at the door need a loan at the end of the month because they’re never paid enough. These poor Dutch people might want things, it’s not a case that the wages they’re paid aren’t enough to live on.

But that’s why the Netherlands has a deficit of 3% and not the British deficit that’s creeping closer to 10% (extrapolated from the 2014 and 2015 figures published by the British government (2) ). The extrapolated figures of the Netherlands will be around 3%. Well, that’s the Dutch for you. Their figures are for 2016, by the way, and makes extrapolation a lot easier: you look at the published figures. You can’t do that with the British government.

And because of this, the British economy is doing just fine! Everything is working as it should, and everybody’s happy. Until something pricks the balloon and it all falls apart… but that’s how the British do things. Because they don’t know what to do, they wait until it’s too late and when it goes pop they still don’t know what to do. But that’s how the British govern themselves: they don’t know what to do, so take away the regulations that might in better times have helped them keep an even keel.

That is a political problem, though, and it is political because the British political parties never really think about their policies. That is for an upcoming post on how Mrs May managed to lose support in the last election because she used the same tactics as the German ultra-right wing party, Alternative für Deutschland. It’s harder to notice when someone’s not doing something…

It makes it easier to get into debt when everybody’s reading about Greece’s problems. If only Britain’s problems were that modest.

Notes:
(1) See my post on The Austerity Craze.
(2) The figures for 2016 will be published in April or May 2018 and will be buried as swiftly as the 2015 figures were. The level of debt in 2014 was bad enough (£1.75 trillion, the figure commonly used in the press for Britain’s debt), 2015’s debt had already doubled (£3.5 trillion, not mentioned in the press since its swiftly buried announcement). It’s okay, dear Brits, it’s not in the news, it’s not happening. Greece’s problems are there to remind you that it’s okay to max out on your credit card and you still can’t afford the next payment for your new Peugeot hatchback.

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