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    There is always an alternative Archived Message

    Posted by Keith-264 on June 20, 2023, 3:17 pm

    https://consciousnessofsheep.co.uk/2023/06/15/there-is-always-an-alternative/

    Having wrecked the National Health Service – including selling off Britain’s emergency stock of pandemic equipment ahead of the SARS-CoV-2 world tour – Jeremy Hunt – a walking example of the Peter Principle – has decided to weigh-in on the Bank of England’s plan to make ordinary people pick up the tab for all of the corporate welfare doled out by the government during two years of lockdown. According to a largely uncritical report by Michael Race and Faisal Islam at the BBC:

    “The UK has ‘no alternative’ but to hike interest rates in a bid to tackle rising prices, the chancellor has said. Jeremy Hunt said inflation – the rate at which prices rise – was the ‘number one challenge we face’. He said the government would be ‘unstinting in our support’ for the Bank of England ‘to do what it takes’ to slow inflation.”

    The “TINA” mantra, coined by St. Margaret of Finchley in the depression of the early 1980s, may have been swallowed by a broadcaster which looks increasingly like a British version of Pravda these days, but there are always alternatives… saying that there aren’t is just a cover for what is, in the end, a political choice.

    This was the real problem with Chief Economist, Huw Pill unwisely saying the quiet bit out loud on an American podcast in April. While the establishment media engaged in a fit of faux-outraged pearl clutching and how-dare-you-ing over the suggestion that anyone should have to be poorer in order to bring inflation under control, the more pertinent question ought to have been, who among us should get poorer? Because what the Bank of England is doing, is creating a deflationary storm which will land disproportionately upon those least able to cope.

    Not that this is immediately obvious given that the minority of the population fortunate enough to afford a mortgage tend to be those that the establishment media focuses on when they run stories about interest rates. Fair enough… if you have a variable rate mortgage then your housing costs will have risen dramatically since the heady days of lockdown… which, by the way, is when there was a spike in new mortgages – which are only now coming up for renewal – as people fled from the cities. But this is not why the Bank of England is raising rates. Their aim is to curtail borrowing across the board so that the amount and velocity of currency in circulation plummets. And because of their reliance on a demonstrably wrong Phillips Curve model, they won’t let up until we see a big rise in unemployment.

    In the real world though, this is likely to be explosive, because employers have only just recovered from the labour shortages of 2021. And so long as the Bank of England, the Treasury, and the establishment media keep talking about “soft landings,” employers will take what they believe is only a temporary hit, in order to hang onto their workers – particularly those they have invested in training.

    The give-away in this respect is in the data for hours worked, rather than in the headline employment figures. Because while workers are keeping their jobs – for the time being – they have been having their hours cut for more than a year now. But there is a limit to how far employers can stay solvent by cutting hours alone. And once it becomes clear that far from a soft landing, the Bank of England has engineered a deflationary cluster####, instead of the hoped-for gradual rise in unemployment, we are likely to see a tsunami of business closures and lay-offs.

    The crisis is also likely to be exacerbated by the banks tightening their lending standards. This is something which is not obvious to ordinary people, who might only take out mortgages once or twice in a lifetime. But it is a growing concern for the thousands of “zombie businesses” which never really recovered from the 2008 crash. These are companies which – because of near zero percent interest rates – had been able to service their debts, but not repay them. And so long as the banks were prepared to roll over their loans, they could continue to do business despite being technically bankrupt. But with interest rates rising rapidly, these businesses are struggling even to service their debts – and banks are increasingly reluctant to renew them.

    The same is true in the housing sector where, far from making it easier for people to get on the housing ladder – by lowering house prices – rising interest rates are screwing home buyers and renters alike. Just as a wave of zombie business bankruptcies is just around the corner, so thousands of two- and three-year mortgages taken out when people moved during lockdown, are coming to an end. This means that thousands of households are about to see their monthly housing costs double or even treble even as their wages have not kept pace with inflation.

    Among those struggling with mortgage costs and rising inflation are the private landlords who account for most of the rented accommodation in the UK. In recent months, the media attention has been on smaller, buy-to-let landlords, who have been cutting their losses and selling up. But even the bigger corporate landlords – particularly those in the commercial sector – are also under enormous pressure to either raise rents – which is increasingly difficult due to a lack of tenants – or sell-up… the end result being giant financial corporations snapping up properties at bargain basement prices and then sitting on them until the economy picks up again. And so, rather than the wished-for decrease in rents, we risk a decline in available rental properties that drives rents up.

    So once again, it is ordinary working people – through increased housing costs, depressed wages, and unemployment – who get to pick up the tab – just like they did after 2008 – while the fat cats in the corporations hoover up the remaining assets… although this time around, even the corporations could be burned. As a wise person once said, a good usurer fleeces borrowers gently, and gets to live off the interest for a lifetime. But a bad usurer fleeces them in one go and is pulled down with them.

    This is more than just a “bleeding heart” plea on behalf of those on the receiving end. Because the growing loss of a critical mass of consumers is threatening businesses and services across the economy. For example, as I reported last month, the loss of a million broadband users threatened internet providers with a similar wave of bankruptcies to those which hit the energy supply companies in 2022. Within the current, debt-based financial system, this “death spiral” can only worsen as the rising costs of doing business have to fall onto a shrinking consumer base which will either walk away or default rather than pay the additional price.

    This, perhaps, is why the politicians and central bankers have dusted off TINA – there is no alternative – as a means of getting their excuses in early. But it didn’t have to be this way. Interest rates are not the only way of reining in spending while lowering prices. And since it was high oil prices which were the main driver of rising prices, and it was the rich who were sat on most of the Covid handouts. One obvious – if heretical to the neoliberals – alternative would have been to cut the duty on fuel along with the standing charges on gas and electricity while plugging the tax gap with a higher rate of VAT on luxury goods and a much higher tax on the highest – and especially corporate – incomes… after all, to paraphrase Huw Pill, they just have to accept they are going to be poorer.

    Of course, simply juggling taxes is no solution to Britain’s broader structural problems. And it is likely that part of any “solution” will have to be a genuine rolling back of the state around what the private sector used to call “de-layering.” In effect, cutting out swathes of executive functions and dispensing with the managerial employees – because there’s hardly anybody left who actually does anything anymore – who currently carry them out. Not least because there are limits on how much more foreign currency the UK government can borrow to bridge the gap between what it spends and what its shrinking tax base can underwrite. Nevertheless, even in an economy in freefall, governments can still choose between ameliorating the plight of the poor or simply shafting them even further.

    They will, of course, do the latter because it is baked into the neoliberal system. But don’t let anyone fool you into believing that they couldn’t have done it differently.

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