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05 December 2012


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Excoriating, for sure, but sadly has a strong ring of sense and truth to it.

Tony Freeman

Spot on on every point!

Garry Taylor

Absolutely spot on!
"Is the decline reversible?"said the Roman citizen at the Coliseum whilst some barbarians were banging at the gates!
"and you can't get a decent chariot wheel since production moved to germania"


Spot on - try MoneyWeek for another analysis which is almost identical - we're stuffed, and only scrapping the entire Welfare State can come close to cutting the £200 billion pa off current Govt expenditure that's required. AND then maintaining that, reduced, spending for a further 20-30 years, to allow our total debt to be repaid.


Is it fine to say 'spot on'!! I acknowledge that all you say is clearly viable and most likely true Terry but the hard part is coming up with what is needed, what would work without falling into blaming the current and past 25 years cultural climate. Also I believe a large proportion of the educated younger generation of 20 somethings have the intelligence and compassion not to buy into the culture of I want and I am owed. Easy to bash the politicians and electorate, I do too. Your the brains here, financially, whats the answer??


Aggressive socialism, not unrelated to the compensation culture,has created a collective mindset that transfers personal responsibility to The State.

UK plc is bankrupt financially and morally and all the vacuous huffing and puffing will not change a thing.

We will return to the 70's within five years. And then the good will leave taking their capital and energy and expertise with them.

Then another Thatcher will emerge but the patient will not recover this time.


Anyone who trots out the cliched 'a country tends to get the leaders it deserves' is in fatal denial of the fact that we live in an elective dictatorship, i.e. our so called ' Western liberal democracy' is a Western 'liberal' dictatorship which we, the people, elect every five years. Electing a dictatorship is not democracy. It's dictatorship.

Try again.


Should I take the maximum cash up front from my public sector pension? I retire next month.

Nick Mayhew

All true, but is "away from this" enough? Where should we be headed? What are the new ideas?


The key point in Osbornes statement not reported by the MSM was that the BOE repayed all coupon payments from the bonds purchased under QE back to the treasury, to be used for further borrowing/public spending! We are now into full on debt monetisation. The economy is now relying on a merry go round of money printing to survive. This will not end well.

Ralph Bagge

Excellent commentary and a bracing reality check.

Martin Cole

Consider this quote from Anne Clwyd MP during PMQ yesterday "“A universal healthcare system free at the point of delivery is what the overwhelming majority of the British people want and is something I remain firmly committed too..."

She received a sympathetic hearing and reply, presumably in recognition of earlier publicity regarding the circumstances of her husband's death and her own emotional delivery.

A short while ago this same MP advised the House that she knew the contents of the still squashed Jillings report on child abuse, some foul details of which she described. In fact she had been aware of these for years!

What can the public make from these facts other than that our MPs typically care nothing for their constituents, until the decay over which they preside actually affects them?

Good post, this is my first visit to your blog, I will be back!


Thank you.

I look forward to seeing your suggestions for the way out of the mess, although they will of course be political suicide. Hell in a handcart comes to mind.

Incidentally, with regional variations most of europe is in the same situation.

And the 'shareholders' are still living the lie and defending it into the future.


I am not in the financial industry, and I do not profess to know much about economics and if you do read/print this it’s a real whinge… I am hesitant to send this but what the hell here goes
I think all of the issues we are now having were entirely predictable and those at fault are the government (turkeys don’t vote for christamas), the Bank of England for not shouting louder, Banks who pushed debt onto customers and harassed bank workers to sell loans and insurance to people who did not need it. Ok the public should have known better but in reality people will always push to the boundaries if they are allowed.
There was a complete lack of leadership. A case of not my job gov.
I believe we need to take a few simple steps to help our countries future
1. Government publish simple accounts to allow the people to understand in simple terms how the economy stands and where the money is being spent
2. Government publish the corporation tax takes from multinational companies, then the public can choose where they spend their money
3. Government make an example, by scrapping their gold plated pensions and take a pay cut. They need to be seen to lead the way.
4. Introduce a new corporation tax for manufacturing companies at 10% - make it attractive to make things.
5. Significantly reduce oversea’s aid
6. Reduce red tape for business and restrict the compensation culture
7. Commercial property must become cheaper to ensure its attractive to open/buy businesses and not more financially attractive to sell profitable business for the land underneath them.
8. Schools are made to teach basic economics to school children (compound interest)
9. Limit the number of credits cards people can hold to one or two.
10. Limit the credit limit on a credit card to a % of income (ideally less than 1 months)
11. Ideally scrap credit cards altogether.
12. Pay people the correct salary and limit bonuses to a smaller % of total pay
13. Print the details of the tax dodgers in the papers, this was great reading in Ireland and increases the papers circulation
This is an example of “professional financial advice” being spouted to friends of mine prior to the crash, take your credit card bill, add it to your mortgage its cheaper monthly, your house is now worth twice what you paid for it so you can now “take money” out of your mortgage to pay for a new kitchen. I was told many times that I was the one living in the loony land for objecting to this type of advice.
I was brought up with a very simple principle, if you cant afford it don’t buy it, save for it instead. If you are buying a house max out your mortgage at 3 times your salary and remember you not only have to pay off the interest but the debt as well.
Over the last 20 years this has led to a number of problems, I had never bought a new car (until recently), I had never taken my family on holiday out of the British Isles, my house was smaller than some of my friends.
I did have a friend who worked for city firm, his bonuses were more than my salary, was I jealous yes. I used to ask him what he brought to the world, but I could never quite understand what he did, stupid me.
The only good thing is I am an Engineer, we make things, we execute projects all over the world, we bring something to the world. Read Warren Buffets book Snowball and it all makes sense.
I still save to buys things, but now my mortgage is paid off, I have no debts, I have been abroad on holiday, there are great deals on new cars and now I have a stash of cash in the bank. Even house prices have started to come down where I live. I can’t wait for interest rates to rise.


It's unfair to say that we get the government that we deserve and elect. You couldn't get a cigarette paper between the policies of the main political parties so it's all a farcical pantomime with no real choice for voters. Helped along of course by a compliant media who are fully on board with the farce. Listening in apt awe of the last lot of wasters who were in power as they wax lyrical on their comfy sofas about how they would turn things around if they were in charge. Things that they caused in the first place. Then a new set of wasters and crooks take over and the cycle re starts all over again.
There are alternatives. Like the Iceland model or UKIP. But they are ridiculed and undermined as they are a serious threat to the cronyism and onward march to a weak empty vassal of a country run from abroad by unelected technocrats on £300K plus exes.


Impossible to argue with any of this, and like everyone else I'd really like to know the answers, for, as we see in the comments sections of blogs every day, everyone who proposes a solution is applauded by half of the readers and roundly condemned as a spouter of nonsense by the other half! I really believe that we are in uncharted waters and, much like the Chancellor, are trying this and that to see what might work. No wonder that the banks and large corporations refuse to loan and spend, no-one knows what's coming next!


How is "aggressive socialism" is the problem?!! Quite frankly in a marketplace that has happily adopted a neoliberal doctrine, such accusations are ridiculous. Benefits, per capita, have in real terms reduced considerably since the mid-70s. The suppression of wages (directly or indirectly)resulting in a long-term decoupling of wage increases with national growth, the hording of growth reward for fewer and fewer in society, the widening of inequality - all these have contributed to a greater burden on the state to provide financial help to those that don’t have a living wage (remember 75% of those on benefits, are in work). The burden on the state is a direct result of this doctrine's market failure. Thatcher is a false idol - it's her policies that have lead us here. New Labour deserve criticism for their parroting.

E Beaumont

Just to play devil's advocate on some of the points and some of the implications:

1. The ratio of debt to GDP in the years between 1919 to 1945 was typically over 130% of GDP, reaching 238% of GDP in 1947. In 2011 it was 60% [source: http://www.ukpublicspending.co.uk]. Japan has lived with levels way above this for quite some time and is still a civilised, prosperous, optimistic, low-crime, highly-educated society.

2. Debt is owed to someone. I hold a quantity of government bonds, I have lent significant amounts of cash to various financial firms (banks, building societies, investment companies). Like very many retired people, I am in surplus. That is the counterpart of the debts owed to me by the aforementioned institutions. In general, the great bulk of UK debt (public and private) is owed to UK residents. Wipe out those debts if you wish, but in doing so you would wipe out those surpluses as well. This could cause redistribution of wealth within our society but doesn't mean the country's position vis a vis the wider world is necessarily scuppered.

The part of debt which is owed to foreign residents is another matter (though they also owe money to UK residents). UK government debt held by foreign residents is about 30% of the total according to 2010 statistics. This does not strike me as unsustainable, especially with bank rates at 0.5%.

3. The notion of “unfunded” pension liabilities is also bogus. Stephanie Flanders, the Economics Editor of the BBC has an excellent piece here.


4. These debts do not mean that we have beggared our progeny - are we not leaving them very substantial assets as well as debts? Trillions upon trillions of pounds of housing stock, roads, airports, railways, hospitals, schools, universities, scientific knowledge……..?


We get the politicians that the media/political class inflict on us. We are drowning in socialist interventionism because the socialists have for a long time controlled much of the media or the communication roles of pressure groups, charities and State subsidised organisations. 70% of the public digest the news output of the BBC. The electorate are influenced by the Media. The Media is largely socialist. That's your problem.

John pd

Thank you Terry for this cool & clear glimpse of the reality of our predicament.

I look forward to hearing your solution proposals.

Interesting your remark re we get the leaders we deserve.

I've been thinking for a while that in order to stop the "Bread & Circuses" fiasco we have been indulging ourselves with since the Second World War, that we need to restrict the franchise to productive members of the populace only.

IE if you're paying taxes, you can vote.
If you're not contributing to the upkeep of the nation, you do not merit a say in it's direction.

Political suicide, of course, particularly bearing in mind our communist masters in the EUSSR, or will Camoron summon up the backbone to pry us loose from the death grip of the terminal project? I think not.

We live in interesting times.

I always enjoy your blogs, Terry, thanks again.

(PS: my nephew says you have a good head on your shoulders in more ways than one & can look after yourself. Nice one. But not for publication I think.)

Terry Smith

Thank you all for your comments on this piece. A number of you ask what are the new ideas, or what’s the answer. I posted on this blog about six months ago after I wrote a piece for The Times on how I would tackle the problem:


Ian Baylis

Would it be fair to say that the Banking model world wide is broken? Are we simply now guided and instructed by the IMF and World Bank filtering down to governments and onto our trading banks. Apart from other financial problems (too various to list) is the main problem in Greece, Italy and Spain, property speculators, banks and governments going bust and waiting for non involved populous to pick up the tab. Its not a bad proposition for Germany, IMF and World Bank as the ongoing interest and repayments must be very healthy indeed. Conspiracy, maybe but somebody's creaming it awy from most of us!!!

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