On the debt incurred after the first war and during it – this was borrowed from the US. It declined in the early 1930s because we and other governments defaulted on it when the US government, after the Wall ST crash, asked for it back early. This played a major part in freezing up world credit that led to the great depression. Sounds familiar?
Finally on the high level of private debt, this is what is at the centre of the debt/deficit/cuts. It is the losses over the last three years – estimated globally to be running at $2.3 trillion –that banks have made on private loans that led to the bail outs and the recession. It was paying for these bailouts and the shortfall in revenues as welfare expenditure increased during the recession that is at the root of our ballooning debt and deficit. Having high private debt goes hand in hand with having high and increasing levels of public debt spread right across society and countries.
The government is going to cut £83bn over five years which is 9% of the £1.1 trillion we have to find over the next five years. This is based on optimistic estimates about the economy. The government and city economists have got this wrong consistently over the last three years.
We were almost alone in January to March 2009 in calling the recession/near depression and the near collapse of the financial system and the bankruptcy and near bankruptcy of several banks and the collapse of the housing market. The LeftBanker is currently ranked 4th by Bloomberg amongst 1000 global analysts for the accuracy of economic forecasts.
Be wary of those who say the debt is not a problem and that has been bigger in the past. There is a very good reason for that as we have spelled out above. It is likely with the cuts and reduced growth they bring on will mean at some time we will have go to the IMF. Their cuts as a condition for loans will be much tougher.
We have to show that we are facing a crisis – which the coalition is walking blindly into it. But we have to build an alternative solution that does not mean we pay for a crisis made by the bankers, governments and the wealthy.