The Spectator has a strong article on just how bad the public finances are in the UK as a result of the private finance initiative (PFI) being used to move lots of public spending items, including traditional “core” activities, “off the balance sheet”. As I have said before, the very notion of “off-balance sheet financing” needs to be smashed into atoms. If someone has a debt to someone else, it has to be recorded somewhere; it does not just vanish into thin air. Gordon Brown was an enthusiastic user of PFI to reduce the recorded total of debt to give the impression that our finances were in better shape than is really the case.
There is a double-standard here. At the moment, there is a chorus of abuse being hurled at investment firms for the problems connected to the credit crunch and some of that criticism may even hold some water. One does not have to be an opponent of the market to be critical of some of the daft investments that have been made. The sheer, brain-frying complexity of financial derivative products appears to have wrong-footed even some of the sharper banks. But politicians have been engaging in accounting practices, such as those involving PFI, which would have corporate executives brought before a court of law or sacked on the spot. The very promises that politicians make over spending commitments such as pensions, for instance, are comparable to hawkers of Ponzi schemes.
There is a real difference between the brutal changes going on in the City, Wall Street and elsewhere, and the unreality of the political circus. With business tycoons, most, if not all of them get the boot if things go wrong, although I doubt many of them will be crying too much, judging by their high salaries. It is a pity that the process of punishing crooked political actions is not as swift.
Meanwhile, the same folk who brought us the likes of PFI will no doubt argue for yet more regulations.
You’re not kidding about the regulation, Johnathan.
Now McCain’s touting a new regulatory body, the “Mortgage and Financial Institutions trust — the MFI” (funny, it even sounds like a cheap, shoddy, build-it-yourself edifice) and it’s being heartily embraced by the proles. One of the stated objectives is to “help financial institutions avoid bankruptcy, expensive bailouts and damage to their customers”
Gee, how’s that gonna work?
I moved to the US from the UK, and socialism’s followed me here. Any suggestions where I can emigrate to NOW?
Bastiat crystalized it that the State should not be allowed to do what private citizens cannot. Some people believe this to be a given. How they traverse the thin span between Public and Private actions, and the 180* inconsistency, can only be explained that it is near religious. All sorts of superstitions are explained by simply pulling the plug on logic. Leap, ye faithful, and leap again. And that is why arguments against such concepts is a losing proposition, just like it is trying to talk someone out of their religion proper.
As far as bluntly stating a balance sheet, the US Federal government has been doing just that for the last decade in the Financial Report of the United States Government, the latest clearly stating the that US has a $54 TRILLION accrual basis debt. It makes not a bit of difference. The bones get rattled and the tribe, which fears the surrounding darkness outside the firelight, keep up the chants and make the human sacrifices. Modern man simply replaces the altars with gulags and camps.
If i was one of those conspiracy theorists i would say it is a plot to kill the Pound and make it possible for you to get the Euro.
I think you are one of those conspiracy theorists, luckylucky.
Bod, maybe you brought it here! And maybe if you leave it will follow you again! Worth a try . . .
Let’s be clear here.
Public spending promises on pension funds are not “comparable to [sic] hawkers of Ponzi schemes”.
They just are Ponzi schemes.
No need to beat about the bush.
According to the man who resigned, in disgust, his post in the United States government the unfunded liabilities (Social Security, Medicare and so on and so on) is “only” forty trillion. – not 54 trillion Brad.
Of course either figure means that the United States Welfare State (like the Welfare States of all Western nations) can not be sustained in the long term.
“But the United States does not have a Welfare State” – if anyone thinks that please read the first paragraph again.
As for spending a trillion Dollars right now – on bailing out the financial services companies (the banks and so on).
I regard the proposal as useful – not economically useful of course, but useful in another way.
It is a clear way of finding out who supports the free market – and who supports the credit bubble. And it shows that one can not support both – one must CHOOSE.
The mainstream “free market” economists support the bailout – showing they are not free market people at all.
A free market person would tell President Bush and his advisers to jump in the river.
“But how would you save the financial system Paul”.
One can not save the credit bubble financial system (that is the point), and tossing endless billions at it just prolongs the agony.
According to the man who resigned, in disgust, his post in the United States government the unfunded liabilities (Social Security, Medicare and so on and so on) is “only” forty trillion. – not 54 trillion Brad.
Of course either figure means that the United States Welfare State (like the Welfare States of all Western nations) can not be sustained in the long term.
“But the United States does not have a Welfare State” – if anyone thinks that please read the first paragraph again.
As for spending a trillion Dollars right now – on bailing out the financial services companies (the banks and so on).
I regard the proposal as useful – not economically useful of course, but useful in another way.
It is a clear way of finding out who supports the free market – and who supports the credit bubble. And it shows that one can not support both – one must CHOOSE.
The mainstream “free market” economists support the bailout – showing they are not free market people at all.
A free market person would tell President Bush and his advisers to jump in the river.
“But how would you save the financial system Paul”.
One can not save the credit bubble financial system (that is the point), and tossing endless billions at it just prolongs the agony.