The government wants us to believe our economic growth is sustainable, and that budgetary surplus will fix all our problems. But these are dangerous myths
British public life has always been riddled with taboos, and nowhere is this more true than in the realm of economics. You can say anything you like about sex nowadays, but the moment the topic turns to fiscal policy, there are endless things that everyone knows, that are even written up in textbooks and scholarly articles, but no one is supposed to talk about in public. It’s a real problem. Because of these taboos, it’s impossible to talk about the real reasons for the 2008 crash, and this makes it almost certain something like it will happen again.
Now, obviously, the “private sector” includes everything from households and corner shops to giant corporations. If overall private debt goes up, that doesn’t hit everyone equally. But who gets hit has very little to do with fiscal responsibility. It’s mostly about power. The wealthy have a million ways to wriggle out of their debts, and as a result, when government debt is transferred to the private sector, that debt always gets passed down on to those least able to pay it: into middle-class mortgages, payday loans, and so on.
The people running the government know this. But they’ve learned if you just keep repeating, “We’re just trying to behave responsibly! Families have to balance their books. Well, so do we,” people will just assume that the government running a surplus will somehow make it easier for all of us to do so too. But in fact the reality is precisely the opposite: if the government manages to balance its books, that means you can’t balance yours.
But if you push all the debt on to those least able to pay, something does eventually have to give. There were three times in recent decades when the government ran a surplus:
Note how each surplus is followed, within a certain number of years, by an equal and opposite recession.
There’s every reason to believe that’s exactly what’s about to happen now. At the moment, Conservative policy is to create a housing bubble. Inflated housing prices create a boom in construction and that makes it look as if the economy is growing. But it can only be paid for by saddling homeowners with more and more mortgage debt. Here’s the Office for Budget Responsibility’s own figures on what’s going to happen to the cost of housing in the next few years:
The expression “takes off like a rocket ship” comes most immediately to mind. And here’s what it says will happen to household debt as a result:
This takes us right back to exactly where we were right before the 2008 mortgage crisis. Do you really think the results will be any different?
But something along these lines has to happen when the government runs a surplus. Everyone will just keep pushing the debt on to those least able to pay it, until the whole thing collapses like a house of cards: just like it did in 2008.
Full article: Britain is heading for another 2008 crash: here’s why (The Guardian)