A couple of days back there were huge demonstrations in UK (about 250.000 people) against “austerity” measures. If you are interested, you can read about them in the The Guardian – UK in an article that they titled “UK anti-austerity demonstrations”. That was news. This is analysis. We are not actually interested in what happened but what triggered this happening and what is the current state of mind in UK.
Basically? UK is utterly broke. No surprises here. Thus, politicians (Conservatives) which were elected in an election that surprised everybody and in a surprising move, decided to…surprisingly… demand massive cuts to UK’s budget. Mind you, this is just their initial move, just like in chess. First, you test your opponent, then you position your pieces strategically and then, when the time is right, you strike. Check-mate. This development would seem like moving against our multiple analyses where politicians must always spend in order to stay in power. How are these cuts compatible with this point of view? Simple. Politicians must spend where and when most appropriate. Cuts are not forbidden, on the contrary, cuts are welcomed under certain circumstances.
What? Look, this is simple. People are stupid. They elected a so-called Conservative government which promised to cut down on expenditures in order to tackle the debt. People are getting worried…and with good reason. And so, in order to get elected the Conservatives promised anything and everything. This “anything and everything” included massive cuts…without pain. That’s right! Politicians never talk about pain because pain does not purchase votes. So, they promised the impossible: cuts without cuts and they got elected. Thus, now is the time to deliver the undeliverable. And so what do they do?
Good question grasshopper. They issue a blank statement that they want to cut 30 billion £ by 2018 including welfare. They deliberately proposed a massive cut hard hitting the poorest people. Are they nuts? No. They wanted the reaction that occurred. Why? Because they have to have an excuse not to cut. You must remember that they must deliver the undeliverable and if this is not possible then they need a good excuse not to deliver yet, at the same time, keeping their voters happy. Presto! The usual useful idiots are pressed into service. Instantly you have 250.000 protesters claiming against the proposed cuts. Presto! Instant excuse not to cut. And so the Conservative government in UK won’t make any meaningful cuts any time soon. Sure. There will be plenty of cosmetic cuts but nothing that would upset the vast majority of Conservative voters. And then…on the other hand… Conservatives will continue to spend. The equation is simple: cut with the left and spend with the right. In the end it all balances out. All part of the political “business”… just like the mob.
In order to understand why this process works, we need to understand people’s state of mind. Basically, they are brain dead. As an example, we can take the statement from Ray Hutchinson (a pensions administrator at the National Health Service) who stated “There is no need for austerity”… “We should be investing in infrastructure, getting more jobs, which will then pay for taxes and then pay off the debt.”
Sure Ray, and while we are at it, would you like those investments to go with a side of French fries and ice cream? How much more ridiculous can this get? Let’s recap.
There is no need for austerity.
Seriously? Other than UK being utterly broke? There is no need for austerity? And when exactly can we expect to be in such a need? When rats become a staple food? When liking glue off wall paper becomes a necessity? But then again, Mr. Ray is an apparatchik who does not produce anything. Zero. Zippo. Nada. Ray is being paid from other people’s taxes.
Investing in infrastructure.
Yet another Keynesian myth. Get the government to print money and spend it in monstrous projects to “reactivate” the economy. Sure. And then what? Boom and bust…if it works. But will this work? Not a chance. Remember that UK is on ZIRP (zero-interest-rate-policy) and they have their very own QE (Quantitative Easing) program going. Memo to Mr. Ray: governments do not ZIRP and QE if “normal” Keynesian “solutions” work (which they don’t). Investing in infrastructure… right!
Getting more jobs.
Suuuuuuure. And you know how to create jobs, right Mr. Ray? Because, you know, as an apparatchik working for the state you have created soooooo many right? Oh…. That’s right! You created exactly ZERO jobs. As a matter of fact, you create less jobs through the destruction of capital by spending taxes. So… your total contribution to the creation of UK jobs is actually negative!
Pay for taxes.
And, of course, you know how good is tax paying for the creation of jobs because… because… because… camon Ray… help me out here. By paying taxes people have less money thus less savings thus there is less capital for investment into the creation of jobs. And how exactly will this increase jobs? Don’t bother straining your brain. We will give you the answer: it does not!
Paying off the debt.
Right! Except for the tiny issue that the debt itself in un-payable, eeeeeeeeeeeeeeeverything is going to be just right. Not to mention that the same politicians you expect to “do something” are the same politicians that got UK into this debt in the first place! What you are asking from robbers is not only that they steal less, but that they pay back (whit interest) what they stole before! Suuuuuure. Any day now. You will see… Suuuuure.
And that’s pretty much the way things are. Politicians in UK (just like in any other place in the world) continue to play silly games. People in UK continue to be brainwashed and continue to believe politicians. We just wanted to mention this “tiny” issue in case you had doubts… you know… because it’s not like politicians have not tried this before over the last 200+ years… no Sir! This is brand-new and fresh thinking… Right!
Insanity is doing the same thing over and over again and expecting different results. By this definition, all UK protesters and UK citizens sharing the same point of view are insane. Well, they are not. Political evolution takes time. They are on their way and the only question is this one: will they make it before the whole system collapses? We will spare you the suspense: not a chance. But then again, there are UK citizens who believe in the beneficial actions of the state. Fair enough. But if this is the case, where did the UK debt came from, debt that, you know… caused all this uproar? Oh… we see… that’s an entirely different subject totally unrelated to spending. Got it. One last question, where may we pick up our share of gold at the end of the rainbow? Because, you know, if you are going to base all your economic thinking on fairy tales, we would like to benefit… you know… to spend all that gold and create jobs! For the greater good!
Note: please see the Glossary if you are unfamiliar with certain words.
