Archive for January, 2013

Strivers and skivers

Tue, 22nd Jan 2013 Leave a comment

A friend referred me to this article in the Guardian today, suggesting a Land Value Tax could end the budget deficit. I think that’s probably being a bit optimistic; there are going to have to be tax rises, but there are also going to have to be more spending cuts if the budget is to be balanced. A large proportion of the electorate are under the misapprehension that the austerity we have experienced already is reducing government debt, but it is not; it is only slightly reducing the deficit, i.e. the rate at which debt is increasing. The government is actually still overspending by about £130bn per year. The Conservatives, who want to reduce this amount as quickly as possible, backed by sections of the press, have moved the debate onto the concept of “strivers and skivers” in an attempt to prepare the way for welfare cuts. By portraying welfare claimants as skivers they believe they will obtain public backing for cutting “handouts”. Labour, in an attempt to appeal to what the Daily Mail likes to portray as public opinion, have adopted a similar vocabulary and are protesting the government’s benefits cap on the grounds that it mostly affects people in work (the strivers, or Gordon Brown’s famous “hardworking families”). I support the benefits cap because I see the need to cut the deficit as urgent, but, as an alleged skiver, the tone of the debate worries me greatly.

Trying to polarize society in this way is not at all helpful I believe. I wasn’t always a skiver, before I was sent mad I had a well-paid job striving as a computer programmer, and we are all only a redundancy or illness away from making the same transition. Trying to demonize people for political gain is a dangerous game. As the financial crisis progresses, Western governments will find it increasingly difficult to fund their deficits by borrowing money (as many Eurozone countries already do) and will either have to introduce drastic austerity measures, like Greece, risking their public support, or print increasing amounts of money, debasing their currencies and causing high inflation. These are the circumstances under which Adolf Hitler and the Nazi party were voted into power.

The problem with avoiding this scenario is that governments are so obsessed with reacting to public opinion so that they can get re-elected, they have given up any pretence of pre-emptively leading their countries. And people are so used to their welfare state they will not support any government that removes tax credits, free bus passes and the like, so governments will continue overspending right up to the point that their borrowing costs become unaffordable, just like the banks continued buying mortgages right up to the U.S. housing crash. As Private Fraser would say: “We’re doomed!”

Categories: The Economy

Time for another pause

Mon, 21st Jan 2013 Leave a comment

Chart of FTSE-100 at close on the 18th January 2013The FTSE has continued to creep up after the initial surge on the fiscal cliff half deal, but looks like it is running out of steam. The Dow is in overbought territory and the FTSE is almost there with its momentum indicator (14 day relative strength) nearly at 80, so I am expecting a small dip below the 20 day moving average or, perhaps, a sideways move until the mavg catches up.

Categories: Fiscal Cliff, Stock Market

Fiscal cliff: only half a deal

Wed, 2nd Jan 2013 Leave a comment

Chart of FTSE-100 at 1st January 2013The FTSE did pause as I suggested in my last post, but is up strongly this morning after a partial deal on the US fiscal cliff.

Chart of Dow Jones IA at 1st January 2013

The Dow took more of a dip, although I called it a bit early, and is also rebounding. The deal, however, is only partial; agreement has been reached on taxes, but spending cuts have just been postponed for a couple of months so we could be going through this again then. This could mean that the bounce may only be temporary.

Categories: Fiscal Cliff, Stock Market