The answer’s ‘borrow’, now what’s the question?

I like Jeff Randall’s ‘tell it like it is’ style’; it’s just that I’ve always found he has twice as many standards as most other folks. His ability to pinpoint a problem borders on genius, but the genius always winds up turning evil as he moves on to blame the wrong people.

Jeff’s latest piece is at the Torygraph website, and it’s a good Hallowe’en read if you truly want to scare yourself to death. To be fair to the Randaman, he fingered personal-debt shopping as a time-bomb at least five years ago. What he won’t admit is that free-market capitalism can’t function without personal debt: and it can’t show any results in terms of growth and tax take without increasing the gaps between poor, middling and filthy rich.

The more  thoughtful economists are, at last, beginning to face up to this flaw….and the potential social instability that must exist as long as it continues. Irwin Stelzer is an avowedly pro-Mammon free markets hawk, but even he wrote at the weekend that wealth inequity is ‘an issue [that needs] airing and the problem needs solving…the political class  has chosen to ignore or conceal [it] in a thick fog of rhetoric’. He is absolutely right. Between 1997 and 2007, the incomes of America’s top 1% rose by 275%, that of white-collar folks by only 40%. In real terms, however, the take-home, inflation-adjusted pay of ordinary Americans fell by five bucks. You can assume with a reasonable degree of certainty that Lloyd Blankfein’s salary did not behave in this manner. (Over the same period, the property wealth of real America fell by $7trillion).

There is more to this than a quasi-Victorian concern for ‘the unfortunate classes’. Social exclusion leads to desperation – and if only 7% (the latest figure) of US citizens are around to snap up those solid argon nail-clippers, it is also highly unlikely to lead to a recovery. Finally – yet most obviously – consumption-fuelled booms are a tad pointless if 53% of the goods purchase were imported. Down that road, the only thing likely to grow is the US national debt.

The American answer to this conundrum has been to borrow…and try in vain to persuade obese felines to get real. With low borrowing costs (and the UK is just as bad in this respect) the fantasy that everything’s just fine is being allowed to continue. But then, ‘leveraging’ (this year’s buzz-word for hocking stuff) seems to be the answer to everything now. The EU has at last spotted the possibilities of this scam; the only boll-weevil on the cotton plant being that nobody wants to lend money to Skid Row.

So it falls to Cool Britannia – the biggest debt-deluded gdp after America and France – to come up with the most brass-necked scheme yet to fill a Black Hole where State pension monies should be. I should add, by the way, that this new ‘idea’ emerged in the same week that the OECD called the EU Brussels pension plan ‘an insurmountable mountain’.

Regular Sloggers will recall the apoplexy with which I greeted the revelation that senior UK Civil Service mandarins illegally massaged their pension emoluments after 2006….three times, to be precise. At the time I recorded that

‘….according to figures compiled by the BBC, spending on self-awarded Sir Humphrey pensions will more than double by 2014/15. And according to an Office of Budget Responsibility (OBR) report, this rise in spending on provision represents an average increase of 20% a year in real terms.’

I’m sorry to be crude here, but 20 f**king per f**king cent a f**king year? Yes indeed, citizens, we are all in this together….thanks partly to the unvoted, self-awarded pension troughing of just 15,000 Whitehall individuals. Thus, while the UK media became obsessed with Fatty ‘Bulimia’ Prescott charging his understandably broken loo-seats to the taxpayer, Smiley’s People walked off with the equivalent of half the national debt.

But those clad in brass to protect their scrawny necks are always happy to stick them out in the cause of more madness. Tory donor and Hedge Fund bloke Eddie Truell wants to run an active investment fund to plug the £1.3trillion hole in public sector pensions. Now, had Eddie suggested this at the outset of the Mandarin Welfare State in 1947, I would’ve applauded. For having been born the following year, I have always wondered why the founders of the State Pension never bothered to actually create and invest a fund, as such.

By comparison, 2011 is a little late, we being broke an’ all….with people like me just sixteen months from access to the State’s retirement pension, having already been told that I will get less than that Nigerian immigrant who pitched up with an asylum need circa 1983. But the Mandarins seem (if the Sunday Times is to be believed) to be hot to trot for Eddie’s plan. The Sir Humphreys love a man with a plan – especially when it stands a half-decent chance of hiding their own criminality – and such may explain their willingness to ‘enthusiastically assess’ Mr Truell’s ideas.

Unfortunately, Murdoch’s ST takes up seven columns of newsprint before finally admitting that the scheme will require ‘a huge increase in the issuance of government debt’. Which, because of the current low borrowing rates, etc etc bollocks bollocks (see earlier) seems like a good idea.  Once again, the answer is ‘borrow’.

The answer to every question is ‘borrow’. But the correct answer is ‘expect less’. There is a global wealth rebalancing thing going on here, and it cannot possibly be realised (without devastating war) unless the West accepts this cold reality.

All this will be part of the return to sanity…..one day. In the meantime – as this has been a darkish column tonight – I must impart to you an anecdote from The Slog’s half-holiday/half-business trip to Tenerife last week.

The day before we left, I wandered down to the sea and luxuriated in the warm, salty water of an Atlantic micro-climate. As I lay on the beach to dry off – the late rays brushing my God-like bronzed body – two kids were building a sandcastle a few yards to my left. One of them – a girl – arrived with a coup de grace of bucket sand, and plonked it on the little boy’s battlements. After wobbling for a second or two, the sand-shape collapsed, taking Chateau Plage’s western wall with it.

The little boy blinked, looked at the destruction, and then turned to his helper to announce, in tones of pure Finchley,  “Oi you…you’re fired!”*

*I should explain to US readers that The Apprentice in the UK is chaired by Sir Alan Sugar, a well-known and generally likeable Jewish business magnate.