It's not a coincidence, it's a plan

There must be a reason why the Conservatives are pouring Britain down the drain.

Shortly after getting into office as Prime Minister, David Cameron admitted the Government's planned programme of spending cuts would lead to hard times, but said it would boost the economy with growth, investment, jobs and money in people's pockets. Given that the burden of the spending cuts would fall on the shoulders of people who were on benefits, and those earning only modest levels of pay, it was difficult to see where the growth would be coming from.

Cameron took office in 2010, but as early as 2009 Cameron and George Osborne were talking about spending cuts. At that time, global economy was suffering a severe crisis, major financial institutions had collapsed, and an imminent recession was taken for granted. Newspapers were blazing headlines such as, “After subjecting the nation’s biggest banks to detailed public scrutiny federal regulators ordered 10 of them to raise a total of $75 billion in extra capital.” The text would go on to say, “The stress tests were aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected.” (Edmund L. Andrews. The New York Times May 8 2009.)

Closure of even the oldest and most respected bank for financial institution moved from being unthinkable, to being a distinct possibility. And it was all due to sub-prime mortgages. The stress tests were loans to people in low or erratic incomes, who were, because circumstances, charged a higher rate of interest. Banks, hedge funds, and insurance companies bought sub-prime mortgages, first, just those in the United States, and later, finance houses around the world. The high rate of interest was seen as a good selling point; it meant a high rate of return. Also, they could buy a bond of various loans, and spread the risk.

But they were buying bonds of money lent to, literally, people who couldn’t afford a mortgage. Home buyers could afford it because they would be taking on a mortgage with a low, introductory rate of interest. But there was an escalator clause, so that after 2 or 3 years, the rate charged would rise significantly. And in most cases, the buyer would then default.

The crash, when it came, was a disaster. As the bonds reached two or three years old, and the escalator clause was activated, those on very low incomes started cancelling their mortgages. At first, just a few, but gradually, more and more borrowers found the cost unbearable. Some might carry on paying as long as possible, propelled by the dream of home ownership. Others would realise as soon as the escalator clause kicked in, that they were paying out an amount of money that they could not afford.

Bonds which had seemed like a sure thing suddenly became worthless liabilities. In America, companies like Bear Stearns, Merrill Lynch, Wells Fargo, and Lehman Brothers, once seen as invulnerable, were now seen as high risk. Lehman Brothers did in fact go bankrupt.

Sims around the world realised they had to do something to support the economy, otherwise they would be faced with the most serious recession the world had seen in decades. Have so Britain, the United States, Japan and other countries all pumped huge sums of money into their own economies, in the hope of preventing a global crash. The total amount of this bailout was huge. Market expert Barry Ritholtz estimated that it added up to $4 trillion, while the Bloomberg News Service put it at $7 trillion. (John Lanchester, Whoops! p190.)

Ritholtz when compared that amount with historic costly projects in order to convey the enormity of the sum spent to avoid a recession. It was equal to the cost of the Marshall Plan the Korean War, the invasion of Iraq, the Vietnam War and the cost of NASA - plus several other similar costs. (John Lanchester, Whoops! p190.)

The bailout was successful and by 2009 the global economy was more or less stable. But then David Cameron and George Osborne and cut spending. They blamed the Labour government for its ‘wild’ spending, and massive debt. They, the message went, had to cut spending to pay off the debt. But if putting money into the economy boosts it, and avoids a deep recession, then surely taking money out of it risks the possibility of, at the very least, a downturn.

If the government takes money away from nurses, local councils, construction workers and others, those people will spend less. If government or council projects such as building new houses, schools and hospitals, unemployed workers who would have been given a job, will remain on benefits, and spend only modestly. But just to make sure, the Conservative government cut benefits as well. And if people are earning less they will be spending less. They have no choice in this. For most of us, if our income drops, our spending also drops.

But when the drop in income happens to millions and millions of us, as has happened with the post-2010 Conservative governments, it is not merely a matter of personal hardship, but a blow to the national economy. It is worrying how many times the word ‘recession’ has been used since 2010. Under the indifferent watch of Cameron and George Osborne, there was even talk of Britain facing a triple dip recession, that is, three separate and distinct declines in the UK economy.

If the Tories were genuinely stupid, or had no expert advisors to tell them which policies were appropriate for given problems, one could believe that it could be massive incompetence. But when they have taken office after a near global catastrophe, and do the exact opposite of what was done to deal with that crisis, we have to assume that there is something more in play then simple incompetence. They could not have missed the fact that there was a global crisis going on. And surely they would have noticed that the governments of major economies were united, putting absolute billions into combating the crisis.

Yet nearly every policy that the post-2010 Conservative governments carried out, had a negative impact. Cuts to benefits pushed many into poverty, teachers, doctors and nurses had their pay frozen, And zero hour contracts were allowed to flourish with little or no regulation.

The widespread decline in purchasing power had a major effect. Retailers from Iceland to Lidl closed some stores, restaurants such as Wagamama, Frankie & Benny's and Chiquito shut down some branches. Even Marks and Spencer’s was forced to close some branches. When the drop in spending has this impact, one has to recognise that something serious is going on. Rishi Sunak says that he is confident that the NHS has enough money to do its job. It obviously doesn't. Perhaps he also thinks there is enough spending power in the British economy to keep all the major retailers in business. Obviously it doesn't. But maybe the Tories have another agenda. Why the tourists are deliberately de-developing the economy.