While England has been suffering vandalism, riots and looting, the wold's stock markets have been collapsing. The FTSE 100 index has fallen 1000 points in a week, This has a terrible effect on confidence, our savings and is particularly disastrous for people about to retire. The rest of us hope that the markets will recover over time. But something that has dropped 20% in a month may take a year or more to recover and that assumes that the fundamental cause of the troubles will be addressed. And that is not looking very likely.
On this side of the Atlantic the EU is talking about all kinds of methods of supporting the Euro. In the end it will collapse but politicians will spend billions of tax payers money in order to save their pet project. Every proposal that involves extending more credit to countries around the Mediterranean in order to give them time to pay off their debts only kicks the can down the road. To pay off the debts they need to cut spending and increase taxation. Increased taxation tends to depress the economy and is unpopular with electorates. To increase tax collection and reduce benefits spending, the economy needs to expand. There is little sign of economies expanding at the moment and more tax will give less growth - which means less tax income. Many countries like Greece, Ireland and Portugal have debts so big it is unlikely that they can ever pay back. They will default. Lending them more money just puts off the evil day and makes the disaster worse.
Britain is trying to cut debts — albeit very slowly but we also need growth and more tax income.
In the USA things are bad. The government of Obama has spent weeks and weeks arguing and posturing with Congress on the matter of debt limit. Not content with borrowing $14.5 trillion, the government wants to add up to $2.5 trillion to its borrowing limit. The whole pantomime — and it has been a pantomime — has been about presentation for next year's presidential election. Who the Republican candidate will be is not known yet but there is a great possibility that it will be some nutter from the Tea Party wing of the GOP. They want less Washington spending, less government spending and much lower taxes. It was they who led the opposition to Obama's health care reforms — which previously excluded 42 million Americans from getting treatment. At present the Federal government borrows $1 of every $2 it spends. This is totally unsustainable. On top of that there is a vast private debt which is acting as another great block on economic growth. The whole mess linked to the buggering about by the politicians has led to Standard & Poor down-grading the US credit rating from AAA to AA+. This has never happened before in American history. Instead of facing up to it Obama blames Bush and Europe tells everyone that America is still the greatest and will always be a triple A nation. But American government is so atrocious and corrupt. It spends vast sums on armaments so that it can keep making military interventions, tries to spend too little on social services, taxes the poor and protects the rich. Last weekend, after Obama had made his statement on the AAA rating of the USA, he went off to a fund raising dinner which charged $35,000 per plate for people to contribute to the Democratic Party. There were no poor people there and those diners will want paying back at some time. Is not that corruption?
As my title says this all sounds like reports from another planet.
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