Allister Heath has written a very good article in Thursdays Telegraph. Yes, I know it is a Tory paper but his analysis is worth reading. He points out the many failings of everyone- for which Liz Truss is now being blamed. The hypocrisy of the opposition, the Civil service passing the buck for the crisis in our pension funds that it created, the financial institutions that created and sold the liability- driven investments, the pension funds, the Treasury and its staggeringly over- rated mandarins, the regulators, the Bank of England, Kwartengs predecessors as chancellors. He asks ‘ why did no one see this coming? Why did so few people see this coming? Will the tax payer have to pick up the bill? What is the point of stress tests if they can’t cope with a classic deflation of a gigantic unsustainable bubble?’
I am no economist (unlike Allister Heath) but he explains this con trick as a tall Jenga tower - where we have been removing all the bottom bricks and now the tower has collapsed.
What happened is dispiriting in the extreme he says. They had the misfortune of precipitating and accelerating the day ooh reckoning. They were outmanoeuvred by better, more ruthless players and are now incorrectly blamed for all that is wrong with the economy while the real culprits get off scot-free.
Kwartengs mistake was one of presentation and context. They moved too quickly. Instead of a zombie economy based on rising asset prices and fake, debt- fuelled growth - their mission was to encourage Britain to produce more real goods and services, to work harder and invest more by reforming taxes and regulations.
He goes on to say that there are ‘now too many zombies with too much to lose - over indebted companies, too many homeowners and buy to let investors whose lifestyles, tragically, are only sustainable on 1 to 2 per cent interest rates, too many car buyers who thought that cheap credit would be available forever
. There is even more of a sense of entitlement to cheap debt, especially among the middle classes than Truss realises and they all blame her for their pain, even though mortgages are now nearing 7 per cent in the States.’
I can remember interest rates of 17 per cent in the 1970’s when we were struggling to buy a house with 3 young children. Life was tough. Only one of us was working - I went back to teaching as soon as possible - the job market wasn’t good.
Enough anyway- the sun will shine again but I think we’re in for a frosty time - it was ever thus.
