As tensions run high across Europe, France hit out at Britain for running higher deficits, debt, inflation and having slower growth.
France’s Christian Noyer, the governor of the Bank of France made his remarks after ratings agencies threatened to downgrade the Eurozone’s credit rating.
In an interview Noyer said the downgrade was not “justified in regard to the economic fundamentals. Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and whose credit is collapsing.”
This was echoed by FranÃ§ois Baroin, the finance secretary who said, “Great Britain is in a very difficult economic situation, a deficit close to the level of Greece, debt equivalent to our own, much higher inflation prospects and growth forecasts well under the Eurozone average. It’s an audacious choice the British government has made,”
Consumer-price inflation in France is 2.2%, compared to 4.8% in the UK. The OECD (Organisation for Economic Co-operation and Development) puts France’s debts at 98.6 per cent of GDP, compared to the UKs 90%. France’s economy grew by 1.6% in the third quarter of 2011, compared to just 0.5% for the UK.
In some respects, France is wrong about the UK economy. If you look at what the international bond markets, the yield (interest rate) on UK government bonds is 2.2%, whereas the French rate is 3.2%. This is because the markets view the view the Eurozone as a one entity, rather than looking at individual member states as France would like. When the markets look at France, they look at Greece, Italy, Spain, Portugal and Ireland in which the powerhouses of the Eurozone, France and Germany, have vast amounts of capital tied up.
Unfortunately for them, the tactic they employ to tackle the debt crises is more debt – a lot more debt. Every policy they are undertaking completely defies the principles of sound economic and monetary policy. Whilst there are only a few people who actually understand the technicalities of what they’re doing, put simply, they are inventing money out of thin air and giving it to a few select banks, central and private. All this finances massive welfare and government programmes across Europe and cuts off any hope of recovery, as well as pushing up inflation and unemployment – result, stagnation. This is felt particularly so here in the UK.
Sadly, the UK is not isolated from Europe’s economic problems. British banks don’t have the same levels of exposure to bad debt as their European counterparts, yet it is still enough to be felt here at home. However, our economy won’t implode as a result of the Europe’s failure to understand economics, our private sector is smart enough to find new markets if it is forced to. What could result in a full-scale depression though is our failure to eliminate the debt and restore sound monetary policy. Thankfully, we are not completely bankrupt like Greece who should really be liquidating its bad debt rather than getting a bailout. Nonetheless, in 1976 when we went cap in hand to the IMF for a bailout, we were operating a lower deficit than today.
That does not mean we should want a bailout – that would be worse than defaulting or cutting spending. The Japanese economy has hardly grown in 20 years because it continues to issue bailouts and spend its way out of its problems, bailouts only create mal-investment, more bad debt and ultimately pushes the inevitable debt crises to a later date, as is so evident in Japans economy. Japans debt is now over 200% of GDP by conservative estimates, that’s at least $8.5 trillion. In the late 20th century, there was a movement to eliminate all third world debt, perhaps they want to do the same for us?
Out of the three options, default, bailout or cutting spending, I think I know which I would prefer. Nearly every politician continues to make multibillion-pound promises of “free” goods from the government. Yet we continue to operate one of the world’s largest and most generous welfare programmes? It is seemingly impossible for the public to protect their money; taxation and inflation are increasingly looking more like theft.
There are a wide variety of programmes and schemes that taxpayers of all political opinion would gladly see the back of. Take for example the previous government’s central fire control programme, it cost over Â£400million developing the technology, built 9 centres then realised it didn’t work. Not only that, they will remain at a cost of Â£5,000 a day for the next 20 years, serving zero purpose. Whilst this cost of yet another failed government programme is minute compared to the overall debt burden, it is this mentality that has got us into the debt crisis.
Despite all the rhetoric from the political class, there is a consensus that crosses party lines and dominates the main media outlets, and that is silencing the liberty and prosperity that once made Great Britain great. Those in the public eye that attempt to at the very least express another viewpoint are often subjected to smear campaigns and slapped down. To quote Ron Paul, a US politician who has stood up for limited government, less spending, sound monetary policy and liberty, “truth is the treason in the empire of lies.”
But there is an alternative to national (and international) bankruptcy and a government that continues to draw so much from the energies of the British public. It’s the idea of freedom. We hear so much of civil and political freedom, but what of economic freedom? What about our right to spend how we choose and our right to a government that doesn’t hand over Â£800 billion to failed banks or destroy our currency?
It is essential that we break free from the artificial limitations on free debate and begin questioning the status quo of the state’s economic policy and hold to account those that got us into this debt-ridden mess.