If anyone doubted what a pair of dimwitted, public school-educated plonkers we have running our country, then Osborne's pathetic performance yesterday, with Cameron sitting next to him nodding and smiling, must have convinced them that their optimism was misplaced. This was not a budget to solve our nation's economic and fiscal ills, in fact, none of his budgets have ever done so. The final insult for me, and also the point when I switched the 'tellie' off, was when he knocked a penny off a pint of beer! What an utterly pathetic example of totally useless 'gesture politics' that was an insult to our intelligence! Here we have a government spending more and more and needing to borrow more and more. All the sins of omission and commission perpetrated by the last profligate and corrupt Labour government repeated ad nauseum.
Economists make economics ferociously difficult for non-economists to understand but let me assure you it is quite simple. Governments have no money of their own. They only have three sources, your money wrenched off you by taxation, the money they decide to print and the money they can borrow - in your name! There is a limit as to how much money they can raise by taxation, as President Hollande is finding out the hard way in France, because beyond a certain point the higher the rates the less you will collect. It is that realisation that sends politicians scurrying cap in hand to the Shylocks for loans because they are desperate to convince you that they are wonderfully warm-hearted, generous people positively eager to be as liberal as possible with largesse for needy causes - and you fall for it by voting the bastards back in! Alas, as the debts mount the Shylocks begin to assess the increasing risk involved and their interest rates begin to rise. It is usually at this point that the political crooks start to print money and, of course, the more money there is the less it is worth, which means you need more of it to buy the things you need - it's called inflation - and it's inflation that causes the Shylocks to demand even higher interest rates to compensate for the fall in value. So far, so bleedin' obvious, although it is a mystery to me that so few people are able to grasp it.
As I have said before on this blog, when the new government came in at the height of the global financial crisis they had the oportunity to be truly radical and to go to the very source of all our troubles - government spending. The people knew there was trouble and whilst they would have moaned and groaned most of them would have recognised the reality of the times, gritted their teeth and put up with it. But no, Cameron and Osborne fudged it. They cut some government spending, mostly off easy targets like the military but baulked at the real heavy spenders - welfare and the NHS - and for the sake of their image (not the country's as they would have you believe) they ring-fenced overseas aid to places like India which is busy sending rockets into space!
What the government spends each year above and beyond what it receives from revenues is called the 'deficit'. In his first two years Osborne cut the deficit by about a measly quarter but still continued to live above his means! Thus, the national debt which is the accumulation of all those annual deficits added together continued to mount ever higher and higher.
As of yesterday, it is now clear that even Osborne realises that he cannot even maintain a reduction of our annual deficit and that the only way out is to borrow even more. (Of course, there is another way out and that is to spend less but that is quite beyond the wit and courage of these two public-school spivs who run our affairs.) In case you comfort yourself with the notion that even if things are bad here, it's much worse in the rest of Europe, then cast your eye over this diagram:
At this point we must look to an unlikely gang of saviours - the Shylocks! If our posh boy spivs haven't the guts to do what it is required then we must rely on the money-lenders to do the dirty deed. They should slash our ratings and begin to charge a realistic rate of interest on our loans. Then, and only then, will minds be concentrated in the Treasury and the BoE, and possibly, even in the empty heads of the politicians. The other day there was a rather melancholy story concerning the finding of the long-lost violin owned by the leader of the band which played on the deck of the SS Titanic as it went down. Apparently, the man concerned strapped it to his body and it was recovered later. They should present that violin to George Osborne to play as SS Great Britain sinks beneath the financial waves.
My thanks for the diagrams to The Coffee House - and an excellent article by Fraser Nelson