Rachel Reeves and the 5% for Defence expenditure

 

Having seen what we have seen until now when it comes to monies and politics, can you trust the British Prime Minister and his promises about Defence?

I asked and asked again. Can we trust statements made at the latest NATO gathering? Political speeches and posturing do not pay for massive investments and massive borrowing and massive borrowing is already an issue when Britain´s credit rating is at stake. If things become any worse and interest paid on public debt keeps going up, how long before we head for a financial crash?

Any reforms are now compromised for the duration of the present administration and strikes are just beginning. How long will Rachel Reeves be able to keep the boat afloat? There are three ways to get resources and each has a price. We can raise taxes. We can borrow. We can reduce services. For each of the three there is a political cost to pay. Raising taxes can be popular with the left of the Labour Party, but deeply unpopular for the business community and, ultimately, will lead to higher prices of utilities and goods. Borrowing will lean to higher interest paid for public debt. Cutting services will not be popular with members of the public. None of them will be a vote winner in the present environment. 

But what that means for British standing? How reliable can a country that cannot pay its debts be? If one of the core members of NATO cannot afford to deliver what it promises, what does it say about NATO itself?

Wednesday, October 30th, 2024 - Budget Day

 

This is personal, stated the Chancellor of the Exchequer, Rachel Reeves. She refers to realities of the 1980s and 1990s. The Chancellor's efforts to gather capital will drag hundreds of thousands more people into paying tax and even more into higher rates as their pay rises, indicates none other than The Guardian.

Could a personal crusade turn into a nightmare? Changing fiscal rules to disguise debt making it appear as something else does not change the fact that it will still be borrowing. So more taxes and more borrowing that will be increased for public interest, according to the Chancellor.

Ordinary folk and many business were badly hit by the Covid Pandemic and the measures implemented to deal with the Covid Pandemic. After that, people and many business were hit by the energy crise generated by the conflict in Ukraine and the measures adopted against the Russian Federation. 

Now, they stand to be hit again by taxation and potentially higher prices of utilities, housing and daily shopping.

But the Chancellor of the Exchequer still says that she will implement the budget in a way that she will 'protect the living standards of working people'. 

Well, in an interview made in Washington, USA, Rachel Reeves - perhaps inadvertently - made promises that she will have to deliver. If she does not deliver and if the measures implemented by the Labour government become a de facto nightmare, then this will create a widely open door for another Conservative government.

Starting on Wednesday, October 30th, 2024, the government will have to deliver and with every failure, and every new crise, there will be many by-elections along the way in which people will express their discontent.

She talks about building schools and hospitals. Well, what will she do about nurses salaries that are not enough to rent a one bedroom flat? If living costs keep rising, this will be a de facto devaluation of salaries and a worsening of living standards. Before she goes around building schools and hospitals, she will have to look carefully at salaries actually paid to teachers and NHS staff. 

Even with the triple lock, state pensions are not enough to rent a one bedroom flat. State pensions are totally insufficient. Taxing state pensions and private pensions can only worsen an already bad situation. And this is going to do nothing to 'protect living standards'.  

Taxing private pensions, assets and shares? More madness on the way.

 Due to low productivity, Britain has increasingly relied on financial services. There are two sides of banking. One is the conventional side of banking based on mortgages and loans and the other is financial banking, lending money to investors that take a huge deal of risk and therefore expect higher rewards. 

Private pension funds very much depend on shares and investments and values fluctuate on a daily basis, so there is an inherent level of risk. How can you tax shares? Will you tax what a share was worth on Monday or what a share was worth on Tuesday?

Imagine yourself as a Northern Rock shareholder. One day you count your wins. You have an investment and you have a return. The next day, your investment evaporates because the value of your shares is literally zero and you have no return. Are we going to see debt taxed?

The only growth that the present Labour government will produce is the growth of debt, unemployment, illegal employment, and fraud. Launching a virulent attack against the one sector that keeps Britain alive is cutting down the tree on which you are standing. The 2008 financial crise will feel like a pleasant vacation.

The infamous event affecting people who had used their assets to support insurance payments comes to mind. One day they were riding the waves of opulence and the next day they were selling everything they had to pay for insurance claims.

Argentina: Dollarization or exactly the opposite to Dollarization

Headlines in Uruguay indicate that Argentinian President Elect Javier Milei will ban adverts with prices in US Dollars. For example, when it comes to adverts offering properties for renting, prices will have to be in the Argentinian national currency and will no longer be allowed to be published in US currency.

The newly elected President promised to apply a chainsaw to cut the state structure to bits getting rid of much of it as a way to cut down waste. No longer a Minister for Culture, no longer a Minister for Diversity, no longer participation of the state in areas that are better served by the private sector.

Radical measures to deal with radical problems that have been destroying Argentina and have dramatically increased the numbers of those living under poverty lines. To sum up: no more politicking. The newly elected President will be inaugurated on December 10th 2023, but he has been making waves since long before there was a prospect of him even being a candidate for President. What he says is very much what he believes and this will certainly put many people on short notice. The attitude seems to be: change or else.

It has been noted that most of those classed as younger generations who supported Javier Milei did so as a last resort as they are absolutely disappointed with democracy, a democracy that has only led to waste, corruption and mismanagement. The duality Peronismo/Radicalismo has been nefarious for Argentina as it has only helped to preserve the vicious cycle of indebtedness. Argentina is still fighting in American courts to deal with debts created more than 30 years ago and no government - either Peronista or Radical - has been able/willing/competent to sort out Argentina's massive problems. 

 

UK Happy New Year: The threat is that the New Year will bring more industrial unrest with foreseable and unforeseable consequences

If the Lockdown can be blamed for the loss of economic activity, endemic strikes will cause untold damage to a weak British economy and the chances are that inflation will then skyrocket with rates of inflation not seen for ages or ever happening in the United Kingdom. You cannot have a national budget in times of significant economic losses. How can you predict how much you are going to spend if the very same day in which you announce the budget the indicators used to calculate your budget have moved upwards. 

Put it this way. You plan to spend X amounts of Pounds for Health. Inflation will eat away whatever monies you invest in Health. If you say that you will invest 100 Pound and then inflation eats away 20 of the 100 Pound, the actual investment will fall from 100 Pound to 80 Pound. If inflation keeps going up and you end end up with an endless series of strikes with people demanding a series of increases just to keep up with inflation, whatever monies are given as increases will never be sufficient. You cannot go on borrowing indefinitely.  Other countries have tried to survive such a cycle and have ended up defaulting and Britain is not big enough not to fail. Given the size of the British economy, there isn't a single institution that could supply the amount of funding necessary to keep Britain alive.

No government could break such a cycle and the moment the country becomes literally insolvent we are going to lose many of the advances made in many areas including Health and Education. This has already been happening when you look at the number of vacancies that remain unfilled. Immigration will make a bad situation worse because the issue is management and not lack of resources and this is very much apparent when you look at other areas like Tertiary Education. If we keep pumping resources to produce things for which there is no demand then we are going to lack the necessary resources for things for which there is demand. The aim for many years has been to increase the number of those attending Universities without thinking about the kind of degrees we really need. The natural consequence has been rising student generated debt, degrees that end up in a drawer without ever been used in the real world and drop outs. The inconsistencies are pretty obvious but political correctness stands on the way of decision makers. As if this wasn't enough, those in charge of managing the budgets of education centres don't mind accepting students for courses for which there is no future as long as they keep getting funding.

We know that there are issues to deal with but there is no political will to deal with them and status quo sustains a permacrisis.

Strikes generate enormous losses for the economy by paralizing the country. As always, the ones who will suffer more because of strikes are the most vulnerable.

From today, countries that are hostile to the Russian Federation will have to pay for oil and gas with rubbles

 

From today, countries that are seen as hostile to the Russian Federation will have to pay for oil and gas with rubbles. To that effect, they will have to open an account at a Russian bank that will make the monetary conversion to rubbles in order to continue receiving oil and gas from the Russian Federation.

The measure was not unexpected and it makes perfect sense, proving once more, that measures implemented against the Russian Federation will ultimately backfire and end up damaging the economies of countries that allowed themselves to engage in knee-jerk reactions without having a thought about the potential repercussions.

In Germany, Alternative für Deutschland has raised the alarm as Germany faces a struggle with rising energy prices that rather than reducing dependency on fossil fuels increases dependency on fossil fuel at much higher costs. German coal is a crucially important commodity. Whether it is dirty or non-environmentally friendly is absolutely irrelevant. The country needs energy to avoid an economic disaster.

After Covid, some countries in the so called West are living in a permanent state of emergency. In UK, British authorities have announced reductions of Council Tax for certain families for amounts of up to 150 Pound. The only problem is that the same families because of measures taken by British authourities have seen their expenses rise by several thousands of Pound. Little consolation for those facing the direst situations. The number of those living under the radar keeps growing. Cases of families living in a single room shared with complete strangers are on the rise. The number of those falling below the poverty line kees rising and private debt - as well a public debt- keeps rising.

GDP growing but the deficit is still there and income per capita is falling

Public debt grew exponentially under the Labour Administration and public debt is growing under the Conservative/Liberal Democrat Administration.

GDP figures do not reflect reality. Although GDP has grown in nominal terms, in real terms income per capita has fallen. We have more people who earn less and save even less.

For years and years, we have heard about Pensions Blackhole.

Well, with people working today with Zero Hour Contracts and people not earning enough and therefore not paying enough taxes and unable to save, the country will have to spend even more to keep vast numbers of people alive and this means more expensive public services and higher welfare payments that will have to be supported with higher taxes and higher deficits.

What is more, the vast majority of those growing up below the poverty line will be disadvantaged and will inherit the state of deprivation that will be transferred from one generation to the next and this is the point when poverty becomes chronic poverty.

So then, what are the prospects for a country with entire segments of its population living in chronic poverty? You only have to look at countries where chronic poverty is a reality. If you don't earn enough, you don't feed yourself properly and you are plagued by illnesses, in time intelligence levels will fall creating an underclass that will be completely dysfunctional.

Children coming from disadvantaged households or unstable family relationships face an uphill struggle that will condition them for life.

The financial reality and the social reality walk hand in hand.