“Following the Government’s pre-Budget report on Wednesday, the independent Institute for Fiscal Studies said Labour’s pledges to increase spending on schools and hospitals will mean that all other Government departments will face “severe cuts” in their budgets.
Yesterday, Mr Daling claimed that spending in other areas, apart from the ‘ring-fenced’ sectors of schools, health and police, would be “flat” after 2011.
But the real cuts, starting in 2011, could be as high as 19.2 per cent, the IFS said, predicting “a severe squeeze on public services”. Areas affected will include defence, higher education, transport and housing.”
As the various and sundry stimuli packages passed in the past 12 months fail to ignite inflation, tax revenue declines accordingly. However, as the depression grinds on, social costs are rocketing up and we are still intent on expanding our military ventures.
Something has to give.
That something, will be public spending. But deflationary depressions typically last several years thus bringing about the insolvency of the most profligate debtors.
Considering that the West is the self proclaimed holder of the moral high ground and that, through the IMF, World Bank and sundry gravy-train agencies, we are the ultimate arbiters of fiscal and monetary discipline to every one else but ourselves, do you really believe any Western country could likely declare insolvency and repudiate sovereign debt?
If you do, then we have nothing to worry about. Spain, Greece, the UK or even the USA will very likely declare insolvency in the next few months. We tighten our belts, we lose a bit of weight, we go back to manual labor in the fields, we’ll sell all the superfluous trinkets we’ve accumulated in the past thirty years but we’ll be ok.
But if like me, you know that no Western government could possibly admit to bankruptcy without simultaneously admitting to be no better than your garden variety Mugabe, then what do you think the solution would be?