Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold, Silver & HUI Stocks Big Pictures - 28th Sep 20
It’s Time to Dump Argentina’s Peso - 28th Sep 20
Gold Stocks Seasonal Plunge - 28th Sep 20
Why Did Precious Metals Get Clobbered Last Week? - 28th Sep 20
Is The Stock Market Dow Transportation Index Setting up a Topping Pattern? - 28th Sep 20
Gold Price Setting Up Just Like Before COVID-19 Breakdown – Get Ready! - 27th Sep 20
UK Coronavirus 2nd Wave SuperMarkets Panic Buying 2.0 Toilet Paper , Hand Sanitisers, Wipes... - 27th Sep 20
Gold, Dollar and Rates: A Correlated Story - 27th Sep 20
WARNING RTX 3080 AIB FLAWED Card's, Cheap Capacitor Arrays Prone to Failing Under Load! - 27th Sep 20
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelerting Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Payless Growth And Debt Disaster For The UK

Politics / UK Debt Jan 21, 2015 - 04:12 PM GMT

By: Andrew_McKillop


The UK Economic Miracle
Only a few key figures are needed to understand how the"fastest growing economy in Europe" has effectively performed before and after the key date of 2008, whether under a pale pnk-hued New Labour government operating the Extend-and-Pretend mantra of borrow and spend, or the present pale blue Tory and Liberal Democrat governing coalition doing the same thing. The political and parliamentary  numbers game is at least as important as the economic numbers for mapping the UK's economic future. The present two-party system, in fact, could be the last truly UK-wide bicameral Westminster-dominated system and process that the UK has had, for the last several hundred years.

After May 2015, so-called Devolution Max (not Mad Max) will result in a probable 4-parliament system, unicameral outside England, with local parliaments in England, Wales, Northern Ireland, and Scotland. The Upper Chamber or Senate equivalent, the House of Lords, may or may not be scrapped, but would likely or certainly not be reformed and replicated for the 3 non-English parliaments.

Devolving power including tax-and-spend powers is one thing, but dividing and devolving the UK's national debt will be another kettle of fish.

Key issues outside the most basic issue of fiscal and economic power, such as defence and foresign affairs will also weigh heavily on the process of Devolution Max - one very simple- seeming issue will the renewal or not of majority-US Trident nuclear missile systems, presently based in Scotland. Apart from whether or not Scotland would pay its share, or any part of the estimated minimum cost of 30 billion GB pounds ($45 bn), the temptation to not renew them at all, simply to cut budget spending and growth of national debt will be strong. 

The present PM David Cameron has little choice but to propose a 4-parliament system for the UK. Responding to demographic and economic realities, as well as political pressures his administration has also repeatedly aired the subject of a possible 5th semi-autonomous UK region with its own assembly, in the north, north-west and centre of England. In this option or scenario for Devolution Max, an elected parliament only for London, south-east and south=west England would becomes another possibility. In that case we would be talking about a 6-parliament system for the UK!

In these different nations and regions, the role of "What economic future?" is of course a major subject for debate and conversation  - and driver of Devolution Max, Apart from Cameron's Tories, excluding many leading Lib Dems despite their membership of the coalition in power,and loudly criticised by the Labour party, Scotland's SNP, the Plaid Cymru of Wales, Sinn Fein of Northern Ireland, and also deeply criticised by England's UKIP and the Greens, Cameron's endlessly touted economic recovery has morphed into a "payless recovery".

The UK government's own economic statistical agency, its Budget Responsibility agency, the Treasury and other data sources all show that since 2008, the UK has had a low wage recovery of employment. For every 12 new jobs created since 2008, no less that 11 were categorized "low wage". For leading Eurozone economies such as Germany and France, the ratio is closer to 4-to-12 or 3 to 12.

To be sure, this has helped employers recruit and capped inflation in the UK as much as the global retreat of commodity prices and increased competition for developed country market share among manufactured products exporters. Also surely, the rapid fall of inflation - but not of debt - in the UK makes any rise of interest rates a theoretical subject for at least the next 2 years, and probably longer, due to both accumulated and new debt at the national, corporate and household levels, and the dearth of savings.

Higher Pay Impossible - Debt Disaster David Cameron rarely mentions data from the Treasury, of his colleague George Osborne, showing that only since 2010, the UK's national debt has grown by 290 billion GB pounds (about $450 billion). Claims by Cameron and Osborne that the deficit on government spending, or "borrowing requirement" of government could be reduced to "nearly zero by about 2018-2017", from its current 6%+ of GDP will require a massive reduction of spending of at least 30 billion pounds, starting immediately after the upcoming elections, and only  concerning the FY 2015-2016. After that, the draconian cuts in government spending - already accepted as inevitable and necessary by the Labout opposition, will have to continue. This will reduceg government spending by 2017, according to the UK Treasury, to "its lowest level since the 1930s". Now add Devolution Max!

Cameron and the Tories deny there is any necessity or obligation for UK employers, either public or private sector to keep pay low and keep annual pay awards to 1% - 2%, or fractions of 1% where they are simply not frozen. This is despite price rises in some key areas having risen much more than official CPI data shows, for 2012-2013. Very sluggish sectoral growth rates for labor productivity gains and new investment by industry, which is logical with very low pay rates compared with other developed countries on a job-for-job basis, also reduces the margin for awarding higher pay  and larger annual rises. As the UK employers' association the CBI says on a repeated basis, there is little or no marging for employers to raise salaries and wages - even if the wanted to!

Stoically denied by Cameron and Osborne, week after week in House of Parliament debates and weekly question times, the "pear-shaped economy" of post-2008 UK has become an economic fact of life. The UK has a small "revenue and wage elite" with no trickle down to a large and relatively fast-growing low wage majority of the working population. This of course is good for beating inflation, but its implication for economic growth in the next 3 - 5 years is negative, and makes the UK economy especially vulnerable to any international shocks or any rise of interest rates.

Both of these are very likely. The Eurozone, which takes around 60% of UK exports, is now in an openly perilous state where the next crisis is not a question of "if" but "when".Whwther it is the subject of "GRexit" or Greek e-zone exit, rising social tensions and terrorism fears, or increasing deflation in the e-zone, the outlook has to be negative. Likewise, global interest rates have to rise some time, simply because it is totally impossible for them to further fall!

For the UK's fiancial future of debt slavery the political canary in the coal mine has been tweeting on Twitter for a long time. Observers note the significance of the Labour opposition signing up to the most draconian New Austerity program, from May 2015, that the UK has ever had. To achieve the almost certainly impossible targetof zerogovernment borrowing by 2018-2019 (even by shifting date goalposts)this will mean cutting government spending by very close to 100 billion pounds-a-year within 4 years.  This austerity goal can be compared with any of the "ikonic spending" needs of government - whether it concerns the NHS health system, Trident and the defence sector, education, research and development, or anything else.

Devolution Max may be the easy (but disastrous) way out. Britain's future national-and-regional parliaments, if or when they have real fiscal and economic powers, will have every reason to play all the tricky tuness that exist in the Debt Denial songbook. Very possible in the Scottish case, the creation of a Scottish national currency - more on the Greek model than Swiss model! - might be one strategy for Scottish debt dilution and denial. British politicians have only themselves to blame for too many years of extend-and-pretend, and will be forced to make very hard choices.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2015 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules