Opinion: US Treasury starts last measures to preserve borrowing authority ex Reuters – John Gelmini

I thank Dr Alf for reblogging the Reuters article and asking the following open question:

Can you envision in the new multi-polar World order the G20 asking the US to clean house and not wash its dirty washing on the global stage?

Dr Alf’s question is interesting but the day when the scenario he envisages actually happens is not going to happen yet.

It will happen when China, Russia , India and Brazil feel that enough power has ebbed away from the West and that they are in a position to make that sort of demand.

On present trends, without the benefit of a crystal ball, this could happen within the next 10 years because if we continue to insist on carbon reduction targets and not doing anything meaningful to improve exports and growth more wealth and power will flow out of the Western nations so that America will have its soft power checkmated whilst still retaining a military edge with the most advanced weapons.

You will know when this is happening, when China becomes more assertive in its foreign policy, as the Japanese and the Philippines are beginning to discover in their disputes over islands in the South China Sea which contain oil.

Until that day, there will be skirmishing and a sort of phony war, just as there was with Ancient Rome when it reached the limits of its power and was finished off by the Barbarians.

This time round, the country that controls most of the world’s capital flows, makes most of the world’s consumer goods, controls much of Western power generation, controls water supply and has a better state education system producing the scientists and engineers, software developers of the future, is the one holding most of the high cards.

There is no inevitability about this, given faster footwork by our pedestrian and slow-moving political class, who frankly need a Bunsen burner flame applied to them to eliminate their complacency, torpor and “Divine Right of King’s ” style arrogance.

However, time is not on the side of America, and the West if the situation Dr Alf envisages is to be prevented or superseded.


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A Hard Look at UK Social Mobility and Unemployment – John Gelmini

A segment of a social network

A segment of a social network (Photo credit: Wikipedia)

Whilst reading an excellent article from Spiegel which I re-blogged, I reflected on the wide-ranging problems for the current generation of young people in Europe, with youth unemployment in worst cases close to 60%, all seriously aggravated by German excessive zeal for austerity, I pondered the following open questions:

  1. Since the financial crash of 2008, has their been a reversal of social mobility in Europe?
  2. In austerity ravaged Europe, do the children of wealthy, educated, privileged families have an unfair advantage?
  3. How should policy-makers encourage greater social mobility in Europe?

John Gelmini  responded with a thoughtful response focused on opportunities for the UK, which I am sharing below.

[For the interested reader, I re-blogged an excellent Guardian article, interviewing German Chancellor, Angela Merkel, on  her thoughts on youth unemployment in Europe.]

A Hard Look at UK Social Mobility and Unemployment  – John Gelmini

The answers to these questions are:

1)  Yes

2) Yes

3) By reversing the current thrust of policy which is to make the super wealthy even richer and to further impoverish everyone else

In reality, if one looks at the situation which prevailed in the UK and Europe since 1885, the distribution of wealth has remained the same until the present day and if anything is getting worse.

People cannot see this because they own cars, computers, electrical appliances and if they are not on the dole and scavenging in Food Banks they imagine that they are well off.

The figures from the Institute of Fiscal Studies for 2011 (current figures are even worse), tell a different story.

Out of a population which is officially 63.5 million:

a) 730,000 earn more than £100,000 gbp annually
b) 14,000 earn over £1 million gbp annually
c) 0.02% of the population, the super wealthy, earn £2.5 million gbp a year before tax
d) The top 1% of workers (there are 32 million people in the workforce but not more than 16 million of them are actually working) earn £225,000 gbp a year
e) The top 10% earn more than £60,000 gbp

Average earnings in the UK are £27,000 gbp rising to £32,000 gbp in London and the South East and the earnings of Times 1000 Chief Executives are £7.2 million gbp including bonuses, other emoluments, benefits and cars.

The gap between those at the top and those on average earnings is now 450 to 1 or 1000 to 1 if you compare hedge fund managers to those on average earnings.

In Germany, the same gap is about 12 to 1 and perhaps 20 to 1 in Japan which suggests we have adopted the “winner take all philosophy ” which prevails in America where the gap is even bigger.

As a lifelong Conservative, I am no leveler but history shows us that where the gap between rich and poor gets too big society destabilizes. Ancient Rome went in this direction whereby taxes and imposts on ordinary people became so great that people revolted. The revolts were brutally put down by the Roman legions using forced marches to reach them all but in the end there were so many that they were fully occupied in putting them down leaving a power vacuum for the barbarians who eventually consigned that empire to the history books.

If the UK needs a model of Best Practice for its economy and to reverse these trends it needs to look to Switzerland, Singapore and Lichtenstein for governance, tax efficiency and immigration, Singapore for financial services, Finland, Singapore and South Korea for state education, Italy for diet, Germany for exports, the Dutch for reclaiming land from the sea, America for worker productivity, Japan for advanced robotics and the Chinese for getting things done and working with messianic vision.

The UK is good at inventing things but pretty useless at funding them or in seeing the benefits of what has been invented. Its workers are lazy, unproductive and unwilling to change and the boss class likes to reward itself for failure and not invest except in its own pay. All that has to change, and then with sensible emulation of the Best Practices of these other countries, building on the things we ARE good at, and there might be a chance of arresting this country’ decline.

John Gelmini

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