Budget day today. A lot of leaks telling us what to expect but at 12:30 today we will learn just how bad things are going to be. TV news is already talking about slowing the rate of cuts to benefits, maybe there has been a bit of a panic and the Ministry of Truth has been having words with the Ministry of Plenty about just how much can be covered up by propaganda before the proles get uppity.
We are hearing about cuts to working tax credits, a lower outside of London benefit cap and children, teenagers and the under 25s taking it in the neck. The truth will be revealed this afternoon.
In the mean time I want to talk about a scheme that is being used here in the UK and to a greater degree in Greece in order to effect a massive wealth transfer from the poor to the rich, they call this AUSTERITY and it is one of the most cruel economic policies I have ever seen. It is a cruel and utterly vindictive policy.
To support Austerity you are either a self servicing, heartless bastard, determined to fund your corporate and banking masters regardless of the consequences to the poor, scum sucking bottom feeder OR you are unbelievably naive fool, blinkered to the demonstrated results, dedicated to the party politics regardless of the suffering caused and stupid.
I know which one I think the Tories are.
A healthy economy is one in which wealth is active and mobile across the entire population. Without the constant flow of wealth internally an economy becomes stagnant and if this is allowed to continue it becomes toxic and lethal to the people within it.
Suppose one thousand people had £1,000 each. They use it to pay rent or mortgages, buy food and clothing, buy a DVD or two, buy a book, go to the cinema and otherwise keep that money flowing across all sectors.
The shops are selling goods so can afford to pay staff, these staff then have money that they can use to pay bills and buy stuff. The shops can also buy new things to sell. The suppliers and manufacturers are having things bought by the shops so they can afford to pay staff who then have money to go out and use to pay bills and buy things with. Raw materials providers are producing stuff that the manufacturers want so they can pay their staff and on and on it goes.
The wealth of the economy is active and mobile, being used again and again by many people.
Now consider that 999 people had £1 each and one person had £999,001. The people with £1 each can’t pay the bills or go shopping so they spend as little as they can survive on and put whatever change they have left in the mattress.
The one person with all the money pays his bills, maybe he has a big house and his bills are ten times what the little people pay, he buys clothing and food, again he spends more because he goes in the expensive shop and pays more, he buys 10 expensive DVDs and three expensive books and goes to the cinema three times.
The shop selling DVDs sells 10 expensive DVDs instead of a 1,000 cheap ones, so they can’t pay their staff and let them go, more people with no money to spend. The shop can’t afford to buy more DVDs so the film makers run into problems because they can’t afford to make more film, they get rid of the actors and the camera and sound people who become more people with no money. The cinema has to stop putting on shows except when the rich person will visit because one rich person isn’t the same as a 1,000 regular visitors, more staff laid off, more people with no money to spend.
Both of these economies have exactly the same wealth and the same number of people.
Which one do you think is healthy and which one is stagnant?
Yes I know this is a simplification, get over it, I'm not writing for people with economy degrees!
In terms of the situation in Greece and to a lesser degree in the UK. Austerity is being used to make the tax payers and the non tax payers pay for the risks that the banks took with the economies of those nations.
The thing with a risk is, it’s a risk. Your money can go up or go down, that’s why they call it a risk. But our system has changed to one where governments jump in to cover the risk and any loss that a bank may make while leaving the bank to reap the gains. In fact since we have banks putting forward the money to pay off the losses of other banks THEN charging interest on that money that the population is forced to pay, all the banks win and all the populations lose.
The IMF is making a profit from the suffering and Austerity in Greece just as UK banks that were bailed out and then paid for by the population profited from the deal.
Governments are removing all of the risk from banks taking risks, so in an entirely expected move, banks take more risks, because they know governments will bail them out and the populations of countries will be forced to pay for those bail outs. Either from tax money or cuts in benefits through Austerity the population pays.
The Greek PM said just this this morning when he was speaking to the European vultures, sorry leaders. The vast majority of the bail out the Greeks are being forced through years of austerity to pay off never went anywhere near the actual Greek people.
What Austerity does is deliberately stagnates an economy. Call it Trickle down, call it Austerity, call it rob the poor to pay the rich, it’s all the same thing. Money is concentrated and becomes stagnant, banks and corporations moving trillions around as magic money, digital cash, photons on a screen that never tough the real economy and do nothing other than sit on a screen. Government tax incomes fall because the people paying tax earn less so pay less tax while those earning more don’t pay tax anyway.
An economy can grow only if it’s healthy and that means the wealth is active and mobile at every level, the entire population has some money and spends it while earning more, shops and businesses have customers so they can pay staff who then have money. On and on it goes, a never ending cycle of earn and spend. Trickle UP, money flowing in all directions, rich people still being rich but they are making money because it is coming up from below rather than catching the money that falls from above and holding all of the wealth.
Osbourne has already announced that he is changing how the self employed and categorised so working tax credits will be denied to hundreds of thousands of self employed people, rumours are that he is going to reduce it or restrict it to the fully employed as well.
Currently five million people claim working tax credits, this number was three million when the Tories came to power in 2010, an increase of 2 million people, by coincidence 2 million is how many jobs the Tories claim to have created over the last five years they have been in power!
So more people will have less money. Yes Carl that means the government will be spending less money.
But that money while active goes through a lot of hands and every time it does the government get their share in taxes and levies.
Earn a wage or get a benefit. Spend that and pay VAT, buy alcohol, petrol or cigarettes, pay the levy, the places you spend that money pay tax, they pay their staff who go out and buy stuff while paying VAT and tax and levies. The shops buy new stock from suppliers who pay tax and pay staff who buy things while paying VAT and taxes.
If the population as a whole is spending less money and making less money then less tax is being paid and more people are out of work and needing benefits which are cut more and more leaving the poor even poorer and spending less. The cycle goes on.
Tokens like increasing the tax threshold at the bottom mean nothing when so many millions don’t earn anywhere near enough to even reach the £10 or £12 thousand pounds it is set at. Tax breaks for the rich people so they can hold more wealth and stagnate the economy even faster don’t help much either.
Statements about living wages ring hollow when so few companies will pay it and that includes government departments that don’t pay it either.
Solving the problem of a stagnant economy is difficult but it must involve making the wealth move and flow, further restricting the wealth by making the poor poorer will lead to a toxic economy that will become fatal to far too many people within it.
Austerity isn’t a way of making an economy healthy, it is almost purpose built to create a stagnant economy by transferring wealth from those who spend it to those who do not spend it.
Which is why I think you need to be a bastard or an idiot to support Austerity.