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Wed Oct 28, 2015, 08:52 AM

Britain is heading for another 2008 crash: hereís why

David Graeber

British public life has always been riddled with taboos, and nowhere is this more true than in the realm of economics. You can say anything you like about sex nowadays, but the moment the topic turns to fiscal policy, there are endless things that everyone knows, that are even written up in textbooks and scholarly articles, but no one is supposed to talk about in public. Itís a real problem. Because of these taboos, itís impossible to talk about the real reasons for the 2008 crash, and this makes it almost certain something like it will happen again.

Iíd like to talk today about the greatest taboo of all. Letís call it the Peter-Paul principle: the less the government is in debt, the more everybody else is. ...

... if the government declares ďwe must act responsibly and pay back the national debtĒ and runs a budget surplus, then it (the public sector) is taking more money in taxes out of the private sector than itís paying back in. That money has to come from somewhere. So if the government runs a surplus, the private sector goes into deficit. If the government reduces its debt, everyone else has to go into debt in exactly that proportion in order to balance their own budgets.


Now, obviously, the ďprivate sectorĒ includes everything from households and corner shops to giant corporations. If overall private debt goes up, that doesnít hit everyone equally. But who gets hit has very little to do with fiscal responsibility. Itís mostly about power. The wealthy have a million ways to wriggle out of their debts, and as a result, when government debt is transferred to the private sector, that debt always gets passed down on to those least able to pay it: into middle-class mortgages, payday loans, and so on.

... if you push all the debt on to those least able to pay, something does eventually have to give. There were three times in recent decades when the government ran a surplus ...

... each surplus is followed, within a certain number of years, by an equal and opposite recession.

Thereís every reason to believe thatís exactly whatís about to happen now. ...

This takes us right back to exactly where we were right before the 2008 mortgage crisis. Do you really think the results will be any different?


Whole article (which I've had to edit heavily to comply with fair usage here) with graphs: http://www.theguardian.com/commentisfree/2015/oct/28/2008-crash-government-economic-growth-budgetary-surplus

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