News & Analysis
The Rape of Austerity
UK needs £20bn more austerity and retirement at 70, says Price Waterhouse Cooper (PwC) ... Britain faces another £20bn of austerity and an increase in the pension age to 70 if public debt is to return to pre-crisis levels over the long-term, according to a new report. The pension, health and long-term care costs of the large baby-boomer generation will in future be paid for by a dwindling number of working age. The cost of looking after the country's ageing population will become unsustainable unless younger generations work longer and pay higher taxes, analysis by PricewaterhouseCoopers (PwC) has found. – UK Telegraph
Dominant Social Theme: Action must be taken and retirements must be raised. People will simply have to get used to it.
Free-Market Analysis: We have often suggested that the 20th century was a kind of Dreamtime when Anglosphere elite control was at its highest point and people accepted most of the power elite's dominant social themes. But in the 21st century many of these memes have begun to unravel thanks to the Internet, while others are predictably proving to be unsustainable. The idea that Western state capitalism and "investing" could provide a comfortable retirement is one such meme.
As the reality of Dreamtime sinks in, thanks to the collapsing economies of the West and the additional truth-telling of the Internet Reformation era, the massive American and European middle classes are growing increasingly upset. The elites have counterattacked with the usual tools of authoritarianism and war.
Such antidotes will only exacerbate tension and expand the chaos that the elites wish to impose in order to create increased global governance. We shall see, as the Internet Reformation expands, how successful they shall be. The 21st century is not the 20th and the Internet Reformation is a process not an episode.
Austerity is a necessary emergent meme of Western elites within this context. If society is to remain as it is, elite themes having to do with leisurely and prosperous retirements will have to be reconfigured. The promises will have to be reduced. This is already happening in Europe and is gradually moving West to Britain and America.
It is not being well received. People misunderstand it, however; as it is not in our view a diminishment of prospects people are reacting to so much as a diminution of their expectations. The Anglosphere elites promoted Western regulatory democracy as the antidote to Depression. This meme has been exposed for what it is: a hollow promise that has little meaning. The reverberations will eventually result in significant social change in our view. Elites will not be able to control all the ramifications, no matter how hard they try or what tools they use.
Now comes the results of an accounting firms' analysis on the subject (see above excerpt) prepared at the request of the UK Office for Budget Responsibility (OBR). From the Telegraph we learn that the OBR has already warned that tax rises and spending cuts would be needed to pay for age-related health and living costs. PwC puts an estimated price tag on those cuts and tax hikes. The study suggests the UK needs £20bn more in austerity and the retirement age needs to be upped to 70.
Public debt may rise to 90 percent of GDP by 2050, far higher than the current 70 percent, even after the latest cuts of some US$200 billion and an increase in the retirement age to 68. Public debt of 90 percent is significant as it begins to have a significant impact on growth.
The figures that PwC suggests will reduce the public debt to 40 percent of GDP by 2050. This would put the debt back to where it was in 2007 before the financial crisis. "The final costs could be higher still if the Government adopts Andrew Dilnot's report into long-term care. The cost of his plan would be an additional [US$3 billion] a year initially, but rise over time as the population ages." Here's some more from the article:
After a decade, his proposals are estimated to cost £5bn. John Hawksworth, chief economist at PwC, said: "The government has already taken steps to address this problem through reforms to public sector pensions and has started the process of raising the state pension age. But the bigger challenge relates to health and long-term care costs." UK needs £20bn more austerity and retirement at 70, says PwC.
In addition to rising longevity, the problem is that the pension, health and long-term care costs of the large baby-boomer generation will in future be paid for by a dwindling number of working age people. "Together these two demographic challenges mean that the 'support ratio' of working age people to those above state pension age is set to fall from 3.6 in 2010 to around 2.4 in 2050," PwC's report said.
The OBR, the Treasury's independent forecaster, is almost certain to make similar recommendations next week. In its interim review of long-term UK fiscal sustainability last November, it said: "If left unaddressed, upward pressure on spending from the ageing of the population might well ... eventually put public sector net debt on an unsustainable upward trajectory." It added policy changes would be needed.
These numbers, while dramatic, are probably not the end of the story. What is left unsaid in this study is just how inefficient and spendthrift the public sector of any Western government really is. The British generally tolerate the incredible waste in government for cultural reasons – or they have up until now – but who knows how the next decade will play out?
For a number of years we've been writing that the Internet like the Gutenberg press before it has changed the context of elite dominant social themes. Without total control over information, elites have partially lost a grip on their messaging. Western middle classes are growing increasingly restive, and the ability of Anglosphere elites to justify globalization and the costs associated with it is growing weaker.
The elites continue to pound home the same message regarding "investing" and "capitalism." But we see it is becoming increasingly hard to sustain. This is one of the reasons the power elite has struggled so hard to expand employment in the face of the continuing downturn. Nothing destabilizes society like long-term unemployment.
Unemployment is a predictable result of the West's central banking economies. These economies are based on phony paper money flows. Central banks overprint money and trick people into thinking the economy is better than it is. Businesses expand and then, when the crash inevitably comes, are unable to cope with expanded liabilities. The bankruptcy of businesses in particular aggravates the downturn.
Elites profit from downturns because thanks to their control of central banking they have money when others do not. Thus, consolidation further centralizes elite control of finance and the larger economy. The trouble comes, however, when this cycle is repeated too often.
After sustained intervals of central bank stimulation, price signals grow confused. Government interference and an overabundance of paper money has made investing very difficult. Banks do not know which companies are solvent. And entrepreneurs have difficulty determining what sectors of the economy are growing.
Central banking is important nonetheless to the elites. It is a key to their ability to move toward global governance. The ability to print money-from-nothing supports their schemes. The unraveling of employment is a significant check on their ability to easily pursue their goals.
What is going on now is that the Dreamtime the elites were able to create in the 20th century has become exposed for what it is. People no longer believe that investing in the stock market will make them wealthy. It is seen more as a confiscatory situation more ammenable to enriching a few than a promising one for the many.
Additionally, as mercantilist public/private central banking has driven economies into collapse, the elites need to promote the idea of "austerity." They have been waging a campaign to make people feel their governments have been profligate and that the only solution is significant cutbacks. What is left unsaid is that government profligacy is an expectable outcome of central banking overprinting of money. Governments are apt to overspend just as businesses are.
The austerity that the elites are trying to impose on Europe has reached Britain's shores. Americans do not realize it yet, but the arguments over the debt ceiling are the first signs that the austerity battle has been joined in the US as well.
In our view, the pushback against austerity in America will be significant and may even destabilize the current system. It is already doing so in Greece. In fact, people generally may be waking up to the idea that regulatory democracy is unsustainable. This awakening combined with the imposition of austerity programs may have significant destabilizing results.
In America, the Tea Party is already providing significant pushback to the current economic environment. But this is probably only the beginning of a dialogue between middle classes and the larger system. It is one that in our view is bound to grow significantly more heated as the realities of American "austerity" sink in.
The collapse of Dreamtime in Europe, Britain and America may have significant destabilizing results. We regularly trace how elite memes have provided the West with a fairly false historical narrative. But when one of these false narratives attacks people's pocketbooks directly, the results can be explosive.
Conclusion: As we don't believe that current Western economies can be significantly, or sufficiently, re-stimulated, the battle, inevitably, shall be joined. Things are bound to get a good deal more contentious. The results will have an impact on the larger economy and also on specific items from Western currencies to money metals. It remains difficult for us to see many of the former appreciating dramatically or the latter's prices decreasing substantially.
Posted by dotti on 07/10/11 02:09 PM
Thanks for your post--I especially enjoyed the story about the farm helper. I don't remember hearing it, but will surely tell it!
It's also interesting that you have knowledge passed down from your parents of Holland in WWII. It's great to not have to depend on the historians of the world--I think most of them can't help but tint the history they are supposed to report.
My daughter was born in 1968. I remember one day we were talking after she came in from HS. she was so excited that she was learning about the View Nam era. Her eyes aglow, she said, Mom, it must have been really great, all the young people getting together and stopping the war in Viet Nam. I was caught off guard. The Viet Nam Era didn't hold much "charm" for me. I told her about the last of the veterans returning and that (I saw on live TV) people lined up spitting on them and calling them "baby murderers".
That era changed the world forever. Of course, it was very helpful to the PE in moving the "civilized world" in the direction that was to its advantage.
Yes. Gratitude is one of the greatest blessings in life--both the giving and the receiving.
TJ, I enjoy your posts as well! Thanks.
Posted by tjdetmers on 07/09/11 07:29 PM
My parents experieced WW2 in Holland.I was raised on their memories, as we did not have TV or power on the farm. Food and tobacco were power. However, as you suggest,the produce from the farms was commandeerd by the Nazis. Non cooperation was instantly taken care of with a bullet to the head. Do I believe that could happen again? In an instant. The bottom line in this whole discussion is that we are living a very charmed life here in the dreamtime.
It reminds me of the story of the young man that worked for the farmer and attended socialist meetingd on Friday nights. At one point the farmer noticed that the young fellow was not attending the meetings anymore....and enquired as to why that was. The young fellow said that at the last meeting the leader had said that if all the wealth in the world was divided up, each person would have $5000.00. The farmer still does not understand...until the young man says....I have more than $5,000.00.
As you allude to in your post Dotti....what does ownership mean? If I own the land , paid for the inputs and did the work, I should own the crop.Unless the goverment says otherwise. In western Canada we are beholden to sell our wheat to the Canadian Wheat Board....or we go to jail. This was a goverment institution that was created to keep the price of grain down during WW2, because Canada was shipping grain to Britain at a reduced price. The government made up the difference between world price and the British price. As the price of wheat went up it became untenable. Because of the circumstances....farmers went along with it. I believe income tax falls into one of those "temporary " deals as well. A few years ago there were a few farmers who went to jail over this deal...to prove a point. I guess we are already partially trained to acquiece to the idea that our produce does not belong to us.
I choose to be thankful each day for the food and relative freedom that I and my family enjoy. Dotti, your thoughts remind me of the first question and answer in the Heidelberg catechism. "That I am not my own but were bought at a price" This is on a different level......and yet it is not.
Thanks for your input. I enjoy it.
Posted by Leonardo Pisano on 07/09/11 05:57 PM
Ha, budwood, my short story The Sound Tax may very well answer your question....
Click to view link (800 words)
Posted by TMoore on 07/09/11 05:33 PM
Dear Dave Jr:
How exactly should austerity be "applied"? Please be specific.
Posted by dotti on 07/09/11 09:54 AM
Thanks budwood! That is a very good explanation of "eating the seed corn" and it's implications in societies--ours as well as others.
I did not realize that a war against savers was a common occurrence. But it makes sense because welfare states are a creation of the politicians and it requires that they spend more and more; inflation comes into play and savers get robbed.
thanks for your post.
Posted by dotti on 07/09/11 09:23 AM
Okay. I didn't know what Soylent Green meant so I looked it up.
Very interesting story!!!
If anyone else is interested, here is the link to a synopsis:
Click to view link
John, it's not a happy thought, but you are very right: We are Soylent Green.
Posted by dotti on 07/09/11 09:10 AM
Sorry, TJ. I must be disagreeable today! I like the optimism of your post and wish I could agree.
Re: "If we 3% ever realized the potential power that could be ours......we could be as unsrupulous and selfish as the present PE."
Then: "We farmers would probably be willing to sell our production again for some of those Lincoln Greenbacks."
This type of thinking is what got Gadhaffi's tail in a crack.
Just because we are the producers of food--for me, it's just a small portion of what we consume (but I'm working on that!)--does not mean that we "own" it. How long do you think you could hold on to the food you produce if "they" were hungry--or even if "they" needed your food to quell riots?
My area is poor and people grow mostly for their own consumption, so I think our produce may be safe. Where I previously lived in Baldwin County, Alabama, is a fairly major "truck farming" area. If we experience a true collapse, I expect military in some form to be monitoring the produce, making sure that it is put into trucks and sent to those poor folks in the city whose grocery stores are bare of food.
What do you think of that idea?
Posted by dotti on 07/09/11 08:58 AM
Re: "Take away the printing press. Let us keep or trade what we earn. Let them earn their own way. To hell with letting counterfeiters run our lives and own everything on earth."
We have been enslaved through our ignorance! We spend our lives working for room and board and a few baubles. And the illusion that we are making a better life for our offspring.
Posted by dotti on 07/09/11 08:54 AM
John, as much as I respect and enjoy your posts, this one needs one correction.
Re: "They voted for the welfare state, thinking the state would level incomes. In doing so they handed power to the state it should never be allowed to touch. They will pay the price."
S/B: "We will all pay the price."
Posted by dotti on 07/09/11 08:51 AM
I missed this post yesterday. I totally agree with your sentiments and they are well stated!
I find myself impatient for the "collapse" of the "dreamtime" so that we can face the reality of rebuilding!
I believe the collapse is unavoidable, if not imminent. Timing is the unknown.
Blue pill, anyone?
Posted by AllenL on 07/09/11 08:30 AM
The only people who think retirement can be pushed back to 70 are the people who sell jawbone. Try waiting tables at 70 or bending over the fender of a car! the bulk of workers still need physical strength and stamina to do their work and by 65 they are burned out. Most people recognize this intuitively but can't put it into words yet know that the idea of pushing back retirement won't really work.
Posted by John Danforth on 07/09/11 08:20 AM
What is the difference between Lincoln greenbacks backed by the productivity of the people and the debt-money we have now?
ALL paper money is backed by your productivity. It's Soylent Green. It's YOU they are selling.
Take away the printing press. Let us keep or trade what we earn. Let them earn their own way. To hell with letting counterfeiters run our lives and own everything on earth.
Posted by John Danforth on 07/09/11 08:16 AM
Posted by John Danforth on 07/09/11 08:15 AM
They voted for the welfare state, thinking the state would level incomes. In doing so they handed power to the state it should never be allowed to touch. They will pay the price.
Posted by clark on 07/09/11 03:31 AM
tjdetmers said, "We the people" should print "Lincoln Greenbacks" as a new currency backed by the productivity of the people."
Ha, what if, "the People" are slackers? What then?
tjdetmers said, "In this whole discussion it is important to keep in mind the Truth that the rich person and the poor person take exactly the same with them when they die.....nothing. True riches lie somewhere else.....for everyone."
I don't know, somewhere in the middle true riches are about being able to feed ones self and ones family and trying to ensure such after you pass on,... but starving while sitting naked on a rock in the middle of a Forrest appeals to some People I guess.
All I know is, a well respected successful farmer once told me, "You've got to have At Least 40,000 head of hogs to compete."
I think That says a lot about those in the middle.
Posted by Stranger on 07/08/11 10:39 PM
Austerity is bankruptcy - the bankrupt government places itself under the protection of the IMF or "global community" and in return defaults on its promises to the people, while liquidating its capital assets.
Click to view link
If the government were to default on its debts, it could no longer finance the deficit and pay the police, army and courts that protect the state.
The banks win because they are also friends of the international community.
Posted by tjdetmers on 07/08/11 10:15 PM
On the Click to view linksterity has always been a reality of life. But in the last 50 years we have gone from family run mixed farms to family corporate entities that are specialized in certain areas. The maxim has been.....get big or go home."
We now represent less than 3% of the population in first world countries. Democratically we are meaningless. But the truth is that even the PE people come to visit us 3 times per day. If our 3 % decided not to accept monopoly money for our production anymore.....we would be into a new reality quite quickly.
Food has real value and you do not need a PHD to figure that out. Subsidies have hoodwinked agriculture into believing that they are allowed to exist because of nostalgia and the general good.....and to keep us from realizing the financial power that is ours. If we 3% ever realized the potential power that could be ours......we could be as unsrupulous and selfish as the present PE.
Our entire money system has no sound basis. Fiat currencies are monopoly money. At some point the game is over and we go to bed. Debt denominated in Federal Reserve notes should be very easy to pay off. "We the people" should print "Lincoln Greenbacks" as a new currency backed by the productivity of the people. The ink and paper required to repay the Federal Reserve notes in kind should be but a small expense. We farmers would probably be willing to sell our production again for some of those Lincoln Greenbacks.
In this whole discussion it is important to keep in mind the Truth that the rich person and the poor person take exactly the same with them when they die.....nothing. True riches lie somewhere else.....for everyone.
Posted by josejoe on 07/08/11 08:05 PM
one problem with the 'pension situation' in the usa is-most of the real money in the past 25 years has 'sunk' to the top of the food chain. the really wealthy are sharing with no one, creating no jobs and packing off the spoils of having won the war against the 'commie working class' to foreign accounts never to return to the 'punitive,overtaxing country' that they created with their own greed. the ones who will suffer will be the wage-earners who have lived within their means,protected their years of work through savings and investments and moved into nice neighborhoods. they will be the ones doomed to the 'lamppost ropes' when the violent stuff starts in the usa! it's not that far away either!
Posted by dotti on 07/08/11 06:56 PM
Clark, I visited the link and found the conversations interesting.
I remember in my younger years--probably mid to later teens--that I had a conversation with myself: If I was pulled over for no reason and asked to allow a search of my vehicle--should I refuse--even though I had nothing to hide--just to exercise my freedom to do so. I was at that a truly freedom-minded person.
About 10 years ago in LAX (LA International Airport), I was with my brother and made a joke in a quiet voice where I said the word "bomb". My brother was horrified. He was so afraid that the word would be picked up by some surveillence equipment. I thought it was funny at the time.
Then shortly after, I heard a true story about a group of kids on their senior trip with teacher and chaperones. One of the kids quipped as his carryon went through, something like, "Whew, they didn't find the bomb". He was detained and was not allowed to continue on the trip with the class. It made me think: I could have been "detained" for saying the word "bomb".
I am becoming more and more aware of the loss of basic freedoms; unfortunately I have to admit that I do not have the strength or the courage to "fight back" by resisting. Now I suppose I would consider it to be "taunting" rather than exercising my freedom.
But I, like John Danforth, could be pushed beyond certain limits in which case, I suppose I would become an example to the Clovers of what can happen if you choose to resist.
Clark, thanks for the post/link. It made me think.
Posted by Deanna on 07/08/11 06:01 PM
Oh, bravo, sir! Your characterization of the PE as "predators ,who have penis envy for the absolute power of natural law" had me cheering in the aisles! You've boiled it right down to the bare bones. For all their power and wealth they still aren't gods, only men who will live and die like their fathers and like the rest of us. They, too, will have their measure taken.
Excellent articles give birth to exceptional feedback, DB, and today is no exception.