Saving may cause double-dip recession … Prudent households trying to save are in danger of pushing the economy back into recession, economists have warned. Official figures suggest that last year's recession was deeper than originally thought and that families had stopped spending – a move that could lead to a double-dip recession. The data came as Standard & Poor's, the credit rating agency, kept Britain's debt rating on negative watch. S&P said it had concerns about the forecasts laid out by George Osborne, the Chancellor. – UK Telegraph
Dominant Social Theme: Don't you dare save!
Free-Market Analysis: Every now and then we come across an article that is, in pop radio parlance, a "blast from the past." The above article appearing in the esteemed UK Telegraph is one such blast, a screed dedicated to explaining to readers that the idea of saving (and thus controlling one's own destiny) is an out-of-date and unfortunate perspective.
In fact, we thought this sort of reasoning was not being mentioned much anymore in the era of the Internet because it is such a ludicrous argument on its face. If there is one thing the Internet has done, it has been to introduce an alternative to the insanity of Keynesianism. Economist John Maynard Keynes' socialist, leveling practices, which celebrated state action, above all, have been discredited by a tidal wave of free-market thinking. Endless, erudite articles on the Internet have thoroughly debunked the idea that an economic crisis can be solved by the government's spending of more paper money created out of nothing.
This weird idea, of course, is part of a larger dominant social theme – that government can control the economy just as mercantilist central banks can ameliorate financial downturns. The exhortations to spend are necessary in an "Alice-in-Wonderland" fiat money economy and because the idea that people must spend instead of save encourages people to feel both profligate and helpless. It undermines civil society and makes the spendthrift citizen even more dependent on the state. Here's some more from the article:
The gross domestic product figures indicated that the economy fell by 6.4 percent during the 18-month slump, worse than the 6.2 percent previously reported by the Office for National Statistics. It also confirmed that GDP grew by 0.3 percent during the first three months of this year, a slight dip on the 0.4 percent of growth in the last four months of 2009. However, the figures for the first quarter revealed there was a 1.5 percent rise in government spending which added 0.4 percent to the total growth figures.
Household expenditure fell by 0.1 percent. The ONS said the fall in household spending was particularly marked in transport, culture and recreation. This means that, without government spending on the NHS and social services, the economy would have been back in recession during the first three months of the year. Economists said the Treasury's public sector cuts would put the economy in a perilous position. Brendan Barber, the TUC general secretary, said cuts were "the worst medicine possible for a sickly patient".
Vicky Redwood, of Capital Economics, the forecasting house, said: "The GDP figures mean that the consumer economy isn't in a fit enough state to compensate when government spending falls. Once the tax rises start to hit, consumers just won't have enough disposable income to drive the recovery."
This is pure leveling propaganda – whether it refers to the UK (in this case) or to America or other countries in the West. The problem in fact is that government is far too large and basically wastes the trillions that it takes in. The article, above, points out that without government spending, however, the British economy "would have been back in recession." From there the logic flows naturally. No matter how horrible and corrupt various government services are, they must not be cut. That would be "the worst medicine possible for a sickly patient."
Of course the British economy is not a "sickly patient." The British economy is in fact made up of millions of harassed individuals taking human action as best they can. They wish to keep their money for themselves, to spend as they wish, but much of it is removed by government and wasted on products (corrupt education and health services) that return little to society compared to the large amounts they remove and redistribute.
It is true, of course, that banks are wary of lending and consumers are equally wary of borrowing. But this is because with so many ruined entities being propped up by government, it is very difficult to know whom to trust. The free-market's price-feedback loop has been effectively disrupted. The current fiat money system only issues money into circulation via debt. There is likely never enough to go around because the debt-based issuance does not make an allowance for the additional money that is supposed to be collected via interest. Thus, from the point of view of the powers-that-be, if money is stagnating and not circulating, the credit markets gradually collapse upon themselves and the economy comes to a grinding halt.
The whole system is perverse. It has been set up by a power elite for purposes of consolidating wealth and control in ITS hands, not for creating better and more prosperous civil societies. In normal, healthy societies, money is a tool of commerce not a methodology of emasculation. Fiat money inevitably ruins society over time, substituting paper for money metals, and government action for the individual's. It is the reason elites are so averse to gold and silver (publicly anyway) – free market money – and are constantly trying to reconfigure the system with new facilities, new currencies, etc. But surely a system that proposes citizens spend instead of save in order to "save" the economy is obliging us with an ideology that is as repulsive as it is risible.