- Covid and the Russian invasion of Ukraine has recently proven that.
- When a person or a country loses a grip on debt, the consequences are severe.
- Countries that print money and run up debts are fine as long as they remain reasonably stable. But countries (like individuals) who run up big debts have nothing in the bank for a rainy day.
- If bad stuff happens to you personally - like you lose your income or have a big new expense to meet - then not only will your creditors lend you no more but they will try to get their money back by repossessing your assets, or they will at least raise the interest on your debt to very high levels.
- As an over-indebted country, your currency will lose value and essential imports will cost much more (remember the UK is a net importer).
- It’s a potential downward spiral of debt, impoverishment, chaos and violence, and many countries have fallen into that trap in the past. Check out Venezuela, Argentina, Zimbabwe, and Germany before WW2.
Can this really be achieved from the bottom up?
I see four possibilities from this point:
1. We do nothing.
Our society will continue to degrade until it’s busted, like Argentina. Only then will the people realise what they lost and strive to make it better (also like Argentina).
Regrettably, this outcome seems the most likely; it's human nature. Crowds are inert and react mostly to either crises or compelling opportunities. While the State keeps papering over the cracks with funny money, they continue to suspend the inevitable crisis.
2. A great new leader emerges, one who will sober us all up and steer us away from disaster.
We're unlikely to find one amongst the current political cadre. The mucky world of politics repels people of the intelligence, vision, strength, competence and integrity we need - people unafraid to say that we’re borrowing our way into penury, and who won't make foolish, expensive promises to win votes. Maybe 'cometh the hour, cometh the man/woman'?
3. Taxpayers revolt, and force a crisis.
They force the State to stop overtaxing them, indebting them with irresponsible borrowing and debasing their money by printing ever more of it.
Taxpayers don't (yet) have the means to coordinate a revolution. And Parliament isn't going to help them anytime soon. As George Bernard Shaw said: 'A government that robs Peter to pay Paul can always depend on the support of Paul'. But, as history proves, a few determined individuals can trigger revolt.
4. We change of our own volition, through a collective realisation that we need to.
This would be the best option. Internal motivation is so much better than external imposition. I hope that there are enough people who wish to avoid crisis and who are willing to take action. Remember, what you don't change you accept.
So it's up to you now:
Our advanced, modern society was built over hundreds of years at great cost, effort and sacrifice. You were lucky enough to inherit it. But what you don't look after you lose.
Team Up To Win. Team Up Or Lose
A leaked assessment by the Government’s Infrastructure and Projects Authority in 2016 describes the HS2 rail scheme as ‘fundamentally flawed’ and ‘in a precarious position’. The project, with an original costing of £56bn is ‘highly likely to significantly overspend’, with the likely cost increasing to £80bn. It’s notable that there was no popular mandate for this project, and credible analyses of its supposed benefits are hard to find.
The Private Finance Initiative was a means of securing private funding for national infrastructure and services, where private investors’ rewards come from long-dated capital repayments, finance costs, maintenance and operation. It was introduced as a means of keeping capital expenditure off the government’s books, but heavy financial obligations remain.
As of Jan 2018, the National Audit Office reported that “There are currently over 700 operational PFI and PF2 deals, with a capital value of around £60 billion. Annual charges for these deals amounted to £10.3 billion in 2016-17. Even if no new deals are entered into, future charges which continue until the 2040s amount to £199 billion”.It also reported that “The government reduced its use of PFI after the 2008 financial crisis, as the cost of private finance increased. Parliament also became increasingly critical of the model”.Many of the PFI contracts were awarded to Carillon, whose dramatic failure indicates poor procurement and contractor management skills by government. Other large PFI contractors are also thought to be at risk of failure.The NAO’s full report is here: https://www.nao.org.uk/wp-content/uploads/2018/01/PFI-and-PF2.pdf
The National Programme for IT (NPfIT) in the NHS was implemented in 2002 to make the NHS more technologically advanced, but after 10 years and almost £10bn the project was scrapped and labelled as the biggest IT failure ever seen.
This admittedly enjoyable event was widely lauded in political circles as a great success, but it was conveniently forgotten that the final cost of some £12bn was way in excess of the initial estimate of £2bn, the figure which was used to obtain parliamentary approval.
Financial Services - Wells Fargo bank in the USA - this text from fortune.com:“After losing the trust of consumers in 2016 for creating millions of fake accounts, Wells Fargo struggled mightily to win back its customer base with promises of transparency and reform.But Wells Fargo’s woes only deepened in 2017, when the company admitted that it had charged as many as 570,000 consumers for auto insurance that they did not need. Additionally, some 20,000 of those borrowers may have had their cars repossessed as a result. Wells Fargo said it would pay $80 million in remediation. Wells Fargo’s head of consumer banking and some 70 senior managers in the bank’s retail banking segment were also cut as a result.In the same year, Wells Fargo also revealed that it had uncovered an additional 1.4 million fake accounts on top of the 2.1 million the bank previously disclosed had been created without consumer permission.Financial services - JP Morgan bankBefore the sub-prime mortgage collapse in 2006, banks and mortgage lenders could see that a bubble was about to burst. They misled their investors about the state of the market and they were even selling mortgage products they knew to be risky. This behaviour exacerbated the subsequent crash. Afterwards, JP Morgan paid a $13 billion settlement to stop investigations. Other banks including Citigroup and RBS were also fined.Tobacco companiesAs depicted in the movie The Insider, American ‘big tobacco’ firms were subjected in 1998 by the US government to the biggest civil settlement in US history. Using statistics showing that the tobacco industry were putting an immense strain on the US healthcare system, the US government took them to court where they were penalised $200 billion in compensation. The tobacco companies also agreed to change the way they marketed their products.Pharmaceutical companiesIn 2009, US pharmaceutical giant Pfizer agreed to pay £45 million in an out-of-court settlement over the deaths of 11 Nigerian children during drug trials. The country's northern Kano state had accused the company of causing the deaths of the children, and injuring 181 more, during tests of an antibiotic during a meningitis outbreak in 1996.Pfizer was also hit with the biggest criminal fine in US history as part of a $2.3bn settlement with federal prosecutors for mis-promoting medicines and for paying kickbacks to compliant doctors.The company pleaded guilty to misbranding the painkiller Bextra, withdrawn from the market in 2004, by promoting the drug for uses that were not approved by medical regulators.Motor manufacturersThe VW Group were found to have installed software in engine management systems that detected when they were being tested, and temporarily modified engine behaviour to reduce emissions. Some 11m cars were so equipped. US authorities have extracted $25 billion in fines, penalties and restitution from VW for the 580,000 tainted diesels it sold in the US. German prosecutors fined VW Euros 1bn.